North American Investment Grade CDS Index 109.42 bps -2.32%
European Financial Sector CDS Index 119.54 bps -3.58%
Western Europe Sovereign Debt CDS Index 130.66 bps +8.89%
Emerging Market CDS Index 235.09 bps -4.37%
2-Year Swap Spread 29.0 -2 bps
TED Spread 39.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .14% unch.
Yield Curve 245.0 +4 bps
China Import Iron Ore Spot $117.60/Metric Tonne -.42%
Citi US Economic Surprise Index -26.0 -8.8 points
10-Year TIPS Spread 1.88% +4 bps
Overseas Futures:
Nikkei Futures: Indicating +143 open in Japan
DAX Futures: Indicating +9 open in Germany
Portfolio:
Higher: On gains in my Retail, Medical, Biotech and Technology long positions
Disclosed Trades: Added to my (AAPL) long, took profits in another long.
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is very bullish as the S&P 500 trades substantially higher, up to its 50-day moving average, on improved volume and breadth. On the positive side, Semi, Networking, Homebuilding, Gaming, Airline, Paper, Internet, I-Banking, REIT and Construction stocks are especially strong, rising 2.5%+. Cyclical and small-cap shares are strongly outperforming. (XLF)/(IYR) continue to trade well. The 10-year yield is near session highs, rising +5 bps. The US Muni CDS Index is falling another -3.9% to 226.50 bps, which is also a big positive. The Spain sovereign cds is falling another -4.5% to 210.0 bps and the Greece sovereign cds is dropping another -3.85% to 816.16 bps. Lumber is rising +3.4% today, as well. On the negative side, Road & Rail, Drug, Oil Service and Utility shares are underperforming, rising less than +1.0%. China Import Iron Ore Spot prices continue to decline. As well, the Shanghai Composite Index fell -1.62% last night on real estate worries. The Western Europe Sovereign CDS Index is rebounding further after last week's sharp drop, which is also a mild negative. The market is short-term overbought now and will likely consolidate recent gains before an attempt to push up throw the S&P 500 200-day moving average occurs. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, bargain-hunting, less hostile political rhetoric and diminishing economic fear.
EU Pledges 'Maximum Transparency' on Stress Tests. European officials pledged “maximum transparency” on bank stress tests when they publish results bank by bank this month. “The results will be published on July 23 on a consolidated basis, that is, at group level, including foreign branches and subsidiaries,” a European Commission spokeswoman in Brussels said by phone today, clarifying earlier comments by Belgian Finance Minister Didier Reynders. Belgium currently holds the rotating European Union presidency. National authorities may publish further data related to cross-border bank subsidiaries about two weeks later, she said. “It is clear we want to go to maximum transparency,” Reynders told a joint news conference with EU Commissioner Olli Rehn, who said there was “strong unanimity” among nations on the need for transparency.
A benchmark indicator of corporate credit risk in the U.S. fell to a three-week low as stocks rallied and European officials pledged "maximum transparency" on bank stress tests being published this month. Credit-default swaps on the Markit CDX North America Investment Grade Index declined 3.3 basis points to a mid-price of 108.6 basis points as of 12:16 pm in NY. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings decreased 1.3 basis points to 115.4.
Portugal's Credit Rating Cut Two Notches at Moody's. Portugal had its credit rating cut two levels to A1 at Moody’s Investors Service on prospects for weak economic growth and a growing debt burden after the government allowed its budget deficit to balloon. “The Portuguese government’s financial strength will continue to weaken over the medium term,” Moody’s said in a statement today, adding that the outlook is stable. “The Portuguese economy’s growth prospects are likely to remain relatively weak unless recent structural reforms bear fruit over the medium-to-longer term.” Portuguese bonds extended declines after the rating cuts, with the yield on the benchmark 10-year bond rising 7 basis points to 5.50 percent. That widened the yield premium investors demand to buy the Portuguese bond over comparable German debt by 4 basis points to 284 basis points.
Tyco Electronics(TYC) to Buy ADC(ADCT) for About $1.25 Billion. Tyco Electronics Ltd., the world’s biggest maker of electronic connectors, agreed to buy ADC Telecommunications Inc. for about $1.25 billion to add broadband equipment that helps companies connect to the Internet. Tyco Electronics will pay $12.75 a share, or 44 percent more than Eden Prairie, Minnesota-based ADC’s closing stock price yesterday, according to a statement today. The purchase will bolster Tyco Electronics’ profit by 14 cents a share in the first year, the Schaffhausen, Switzerland-based company said.
Oil Increases Most in a Month as U.S. Equities Advance on Alcoa. Crude oil gained the most in a month in New York as U.S. equities jumped after Alcoa Inc.’s earnings topped analysts’ estimates. Oil rose as much as 3.2 percent amid speculation the report by Alcoa, the first company in the Dow Jones Industrial Average to issue second-quarter results, signaled broader economic growth.
U.S. Appeals Court Strikes Down FCC Indecency Policy. A federal appeals court in New York struck down the U.S. Federal Communications Commission’s indecency policy, saying it violates the First Amendment right to free speech because it’s “unconstitutionally vague.” The court considered the agency’s censure of “fleeting expletives” on live television shows. The U.S. Supreme Court ruled last year in a challenge to the policy by media companies that the “pervasiveness of foul language” and the “coarsening to public entertainment” justified the commission’s more stringent regulation of broadcast programs.
Mortgage-Bond Yield Spreads Approach Lowest Level on Record. Yields on Fannie Mae and Freddie Mac mortgage securities that guide U.S. home-loan rates approached record lows relative to Treasuries as evidence of climbing borrowing costs and homeowners’ refinancing difficulties reduce concern that supply will increase. Fannie Mae’s current-coupon 30-year fixed-rate mortgage bonds narrowed 0.04 percentage point to about 0.64 percentage point more than 10-year Treasuries as of 12:15 p.m. in New York, according to data compiled by Bloomberg. The gap reached 0.59 percentage point on March 29, two days before the Federal Reserve ended its buying of $1.25 trillion of home-loan debt.
Imports Point to Pickup in U.S. Spending, Morgan Stanley Says. “With much of the upside surprise in imports in a surge in capital goods, the outlook for domestic investment looks even stronger,” David Greenlaw and Ted Wieseman, Morgan Stanley economists in New York, said in a note to clients. The pickup in business investment meant the world’s largest economy probably grew at a 4.4 percent rate excluding trade and inventories, more than they previously projected and the best performance by that measure since the first quarter of 2006. American companies bought 5.5 percent more capital goods in May, the biggest gain since March 2006, today’s report showed. The increase was led by growing demand for computers, drilling equipment, industrial machines and engines. Greenlaw and Wieseman bumped up their second-quarter forecast for the increase in business spending on equipment and software to 21 percent at an annual rate from 18 percent, which would make it best biggest gain since the first three months of 1998.
June Budget Deficit in U.S. Narrowed to $68.4 Billion. The U.S. government posted a smaller budget deficit in June compared with the same month last year as the economic recovery brought in more tax revenue. The excess of spending over receipts fell to $68.4 billion last month from $94.3 billion in June 2009, according to a Treasury Department report issued today in Washington. It was the 21st consecutive shortfall. For the fiscal year to date, the budget deficit totaled $1 trillion compared with $1.42 trillion during the prior year to date. Even as the economy recovers from the deepest recession since the 1930s, the budget deficit is forecast to reach a record $1.6 trillion this fiscal year as the government funds efforts to revive growth and employment. Corporate tax receipts were up 30 percent for the fiscal year to date to $133 billion from the same period in 2009. Individual income tax collections are down 4.4 percent year to date to $655.4 billion. Spending for the entire government for June increased 3.2 percent from the same month a year earlier to $319.5 billion. Spending by the Defense Department year to date rose to $499.1 billion from $472.8 billion in 2009. Outlays by the Social Security Administration increased to $564.2 billion for the fiscal year to date from $544.7 billion. Spending by the Department of Health and Human Services, which administers the Medicare and Medicaid programs, climbed to $631.4 billion.
Wall Street Journal:
Crash Data Suggest Driver Error in Toyota Accidents. The U.S. Department of Transportation has analyzed dozens of data recorders from Toyota Motor Corp. Vehicles involved in accidents blamed on sudden acceleration and found that at the time of the crashes, throttles were wide open and the brakes were not engaged, people familiar with the findings said.
U.S. Detains 12th Person in Russian Spy Probe. Authorities are detaining a 12th, previously undisclosed person implicated in the federal probe that busted a Cold War-style Russian spy ring, according to a U.S. official familiar with the matter.
CNBC:
General Electric(GE) CEO Jeffrey Immelt said on CNBC the government needs to be focused on creating jobs, and that the country needs to get certain issues, like financial regulation behind it.
Bear-Market Sentiment Is Back: Fund Survey. Investor expectations for economic growth and profit have double-dipped, according to Bank of America-Merrill Lynch's latest fund survey. The survey released Tuesday found that fund managers turned bearish in their outlook on the global economy and corporate earningsfor the first time since February 2009. Investors said they were more concerned about the outlook for US stocks now than at any other point since November 2006.
MarketWatch:
Retailers' Weekly Sales Rise 3.2%: Survey. Chain-store sales for the week ended July 10 rose 3.2% from the year-earlier period, according to a survey released Tuesday by the International Council of Shopping Centers and Goldman Sachs.
A Strong Wall of Worry. Market Timers Became More Bearish in Wake of Last Week's Rally. Last week the stock market had its best week in a year. And yet you'd never know it by reviewing investment advisors' outlooks: At the end of the week they were collectively no more bullish than they were at the beginning. Their skepticism in the face of the rally is a bullish omen, according to contrarian analysis.
NY Times:
Small-Business Lending Is Down, but Reasons Still Elude Experts. The chairman of the Federal Reserve urged banks and regulators on Monday to help the nation’s small businesses get the loans they needed to create jobs. He also acknowledged that economists could not agree on why such lending has contracted substantially over the last two years. Small businesses — those having fewer than 500 employees — employ half of all Americans and account for about 60 percent of gross job creation. Federal data indicate that lending to such companies fell to below $670 billion in the first quarter of this year from more than $710 billion in the second quarter of 2008.
Jeffrey Saut: The Call of the Week. In a past life I wrote fundamental research on container board companies. Currently, those companies are raising prices, which only happens when demand warrants. Then too, rail traffic is increasing and diesel fuel consumption is rising, another metric that is inconsistent with a double-dip recession. Moreover, the number of Manhattan apartment rentals doubled in 2Q10 on a YoY basis, while office vacancies in U.S. metro areas fell in 2Q10 vs. 1Q10 for its first drop since 2007. Ladies and gentlemen, these are NOT the metrics of a double-dip recession! Meanwhile, since 2008 there has been almost NO difference between the forward PE of the S&P 500 Growth and Value composite indices. Obviously, this favors growth versus value, which is why I have been emphasizing Technology in these missives.
Washington Post:
Confidence in Obama Reaches New Low, Washington Post - ABC News Poll Finds. Public confidence in President Obama has hit a new low, according to the latest Washington Post-ABC News poll. Four months before midterm elections that will define the second half of his term, nearly six in 10 voters say they lack faith in the president to make the right decisions for the country, and a clear majority once again disapproves of how he is dealing with the economy. Just 26 percent of registered voters say they are inclined to support their representative in the House this fall; 62 percent are inclined to look for someone new. Those most likely to vote in the midterms prefer the GOP over continued Democratic rule by a sizable margin of 56 percent to 41 percent. Economic worries continue to frame the congressional campaigns. Almost all Americans rate the economy negatively. Only about a quarter of all Americans think the economy is improving. Just 43 percent of all Americans now say they approve of the job Obama is doing on the economy, while 54 percent disapprove. Both are the worst, marginally, of his presidency. Even a third of Democrats give him negative marks here. And overall, intensity runs clearly against the president on the issue, with twice as many people rating him strongly negative as strongly positive. On the question of Obama's leadership, 42 percent of registered voters now say they have confidence that he will make the right decisions for the country, with 58 saying they do not. On the issues tested in the poll, Obama's worst ratings come on his handling of the federal budget deficit, where 56 percent disapprove and 40 percent approve. Obama's overall standing puts him at about the same place President Bill Clinton was in the summer of 1994, a few months before Republicans captured the House and Senate in an electoral landslide.
Washington Times:
GOP Poised to Grab Control at State Levels. Democrats in danger of losing legislatures. Democratic leaders already braced for losses in November in congressional and gubernatorial races may be looking at grief on yet another front: A record number of state legislatures could change party control this year, with Democrats at risk of losing their majorities in more than 20 state chambers, according to a comprehensive analysis. Electing state lawmakers will be especially important this year because the party that controls at least one chamber of the legislature typically wins a seat at the table - and a veto - in the once-a-decade redrawing of congressional districts after the 2010 census.
TheStreet.com:
Hedge Funds Take Aim at Apple(AAPL). This Apple(AAPL) action on the heels of the Consumer Reports iPhone4 downgrade is a dream scenario for hedge funds ahead of the July 20 earnings report. There is no better money making opportunity than the Apple slingshot. Apple's pristine balance sheet, exponential growth opportunity, and innovative future product pipeline give hedge fund's confidence that this stock will always bounce back after being beaten down. As a result they use any and all resources to beat it down when they can.
Owners State to Idle Ships as Dry Bulk Deliveries Hit Record. THE dry bulk market crisis deepened today as capesize owners began to idle their ships, rates dipped below breakeven levels on some routes and fresh forecasts emerged of a record deluge of new ships for delivery in 2011.
OnlineMediaDaily:
Study Finds Mobile, iPads Fastest Growing Media Among Ad Execs. Nearly half (46%) of ad executives - both marketers and agency media buyers - currently are utilizing mobile media as part of their advertising plans, and it is expected to grow at a faster rate than any other major medium, according to the most recent findings of an ongoing tracking study of top industry executives. The study, Advertiser Perceptions Inc.'s Advertiser Intelligence Report, found that 62% of respondents plan to increase their ad spending on mobile media over the next year. Based on the responses, AIR projects that 60% of ad industry executives will be utilizing mobile media as part of their base advertising plans within the next 12 months.
USA Today:
New UAW President Plans March for 'Economic Justice'. New United Auto Workers President Bob King, who was expected to bring a more activist flavor to the UAW, delivered on those expectations Monday by announcing a campaign to refocus our national priorities on jobs, justice and peace. King also said the union has begun picketing Toyota dealerships to pressure the automaker to unionize its U.S. plants and to protest the closing of Toyota's plant in Fremont, Calif.
Reuters:
Stress Tests Include 23% Greek Debt Haircut - Source. EU regulators will apply a 23 percent haircut on Greek sovereign debt held in banks' trading books in stress tests conducted across the 27-nation bloc, a banking source said on Tuesday.
German Banks to Pass Stress Test - Bank Sources. Preliminary results show that German banks including the state-controlled landesbanks are on track to pass the European stress test, several people close to the 14 German lenders said.
Fed Says Credit Somewhat Looser in Last 3 Months. Hedge funds and private equity firms had an easier time raising capital in the last three months, but the market for asset-backed securities remains crippled, according to a new Federal Reserve survey. The Fed's first-ever Senior Credit Officer Opinion Survey, released on Tuesday, suggests financial markets are still fragile because banks are reluctant to lend. But it also shows conditions are improving, if slowly.
Applied Materials(AMAT) Sees Positive Demand Trends. Applied Materials Inc (AMAT) said on Tuesday that demand for its products and those of its customers had successfully withstood broader economic woes. The world's largest producer of chip-making gear said unemployment problems in the United States and currency issues in Europe had so far had little impact on its business.
California Pizza(CPKI) Ups Q2 Profit View, Shares Jump. California Pizza Kitchen Inc (CPKI), which is seeking a buyer or a restructuring, raised its second-quarter earnings view on quarterly sales, and its shares jumped nearly 7 percent.
Financial Times:
Greece scrapped plans to refinance 12-month securities today and will auction only six-month treasury bills, citing Petros Christodoulou, who heads the country's debt management agency. It's Greece's first attempt to raise money on the capital markets since agreeing to a $139 billion bailout package with the EU. The change of plan was made because of concern that investors would want exceptionally high rates of return and hurt confidence in Greece's economy and debt markets.
Struggling Illinois Eyes $900 Million Bond Sale. The cash-strapped state of Illinois on Wednesday will set terms for a bond sale as it seeks to borrow nearly $900m in a test of investor appetite for troubled US local issuers. States and municipalities, which raise money in the $2,800bn municipal bond market have come into the global spotlight after several years of budget deficits and worries about global public finances. “The state of Illinois is currently the poster child for all the market concerns about the State budget deficit and inadequate public pension funding in the US,” said Triet Nguyen, a municipal bond trader at Ziegler, a Chicago-based broker dealer. Illinois has nearly $5bn in unpaid bills and its pensions system is funded at about 50 per cent, the worst such ratio of the 50 states. Its inability to tackle these fiscal problems in its latest budget led to credit ratings downgrades and a rise in the cost to insure its debt against default to the highest for any US state.
DigiTimes:
Rumors About OLED iPad Resurface. Apple reportedly plans to launch its second-generation iPad, using 5.6-inch and 7-inch OLED panels, as soon as in the fourth quarter of 2010 with Compal Electronics having a chance to receive the orders, according to sources from component makers. The new 5.6- and 7-inch iPads will mainly target the e-book reader market, separating them from the 9.7-inch model, which mainly targets multimedia entertainment, the sources stated.
Duke Says Fed Has 'No Plans' to Use More Monetary Policy Tools. Federal Reserve Governor Elizabeth Duke said the central bank has no current plans to deploy additional tools for stimulating the economy. The Fed could alter its communications strategy, lower the interest rate it pays on excess reserves or replace mortgage- backed securities that are rolling off its balance sheet, Duke said today in an interview with Bloomberg Television, when asked what tools the central bank has at its disposal. “I would emphasize there are no plans to do that at this point,” she said. “There are a lot of reserves out there in the system,” Duke said. “We don’t think the barrier is there’s not enough money out there.” She also said “I think we are in the right place” on monetary policy. On the economy, Duke said, “we are seeing moderate growth, we are seeing subdued inflation.”
U.S. Hospitals Improving Speed, Quality of Heart-Attack Care. Hospitals in the U.S. are delivering faster emergency care to heart-attack patients, increasing their survival, an analysis found. In 2009, 88 percent of patients with the most urgent kind of heart attacks received artery-clearing procedures within the recommended 90 minutes of arriving at the hospital, compared with 64.5 percent in 2007, the study found.
Suntech Power(STP) Falls Most in Two Month After Citigroup Recommends 'Sell'. China’s Suntech Power Holdings Co., the world’s largest maker of polysilicon solar-power modules, fell the most in two months in New York after Citigroup Inc. recommended selling the stock and said next year’s earnings may miss analysts’ estimates. Suntech declined 7 percent to $10.57, the biggest drop since May 6.
China Stocks Drop Most in Two Weeks as Government Maintains Property Curbs. China’s stocks fell, with the benchmark index declining the most in two weeks, after the government quashed speculation it will abandon real-estate curbs that drove property prices to snap 15 months of gains. “The government isn’t likely to relax tightening measures as it wants to transform the country’s growth model to focus on consumption rather than investment,” said Zhang Qi, an analyst at Haitong Securities Co. in Shanghai. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, lost 29.73, or 1.2 percent, to 2,460.99 as of 10:27 a.m., the most since June 29. The gauge has slumped 25 percent in 2010, making it Asia’s worst performer, on concern government efforts to curb inflation and property speculation will slow the economy. The Ministry of Housing and Urban-Rural Development reiterated that it will maintain curbs on speculative purchases and increase market supply. The statement was in response to media reports that said China may abandon its current property policies, it said. China’s banking regulator also said it has made no changes to policies on home loans, according to a statement posted late yesterday to the website of the China Banking Regulatory Commission. The regulator called on commercial banks to strictly enforce home loan rules, it said. Harvard University professor Kenneth Rogoff said July 6 that a “collapse” in real estate is beginning, while Barclays Capital forecasts prices may fall as much as 30 percent in the next 12 months.
(BP) Installs Sealing Cap on Errant Well. Apparent Success of Company's Latest Effort Holds Promise of Containing a Nearly Three-Month Long Environmental Crisis.
Avis Aims to Outbid Rival Hertz for Dollar. Avis Budget Group Inc. is proceeding with plans to make an offer for Dollar Thrifty Automotive Group Inc. that would top rival Hertz Global Holdings Inc.'s $1.2 billion bid, and is looking to take on more debt to finance the deal, people familiar with the matter said Monday.
Bloomberg Businessweek:
EU Officials Want Banks to Seek Private Cash Before State Help. European officials want banks to try to raise money themselves before seeking state support if stress tests by regulators reveal “vulnerabilities.” “It is firstly up to the banks themselves,” Dutch Finance Minister Jan Kees de Jager said in Brussels late yesterday after a meeting with euro-area counterparts.
CNBC:
Cramer: Is Washington's War Against Business Over? “Could we be seeing a cease-fire, or even a truce, in Washington’s war against business?” Cramer asked viewers on Monday. “That would be about the most bullish thing that could happen right now.” (video)
New U.S. Attorney Vows Crackdown on Hedge Funds. Seconds after officially becoming Connecticut's new U.S. Attorney, David Fein announced a crackdown on securities fraud, particularly criminal management in the operation of hedge funds. Fein said he is in the process of building a securities fraud task force composed of investigators and prosecutors. Its aim will be to "investigate and prosecute sophisticated financial fraud that has caused so much harm to investors and the financial market."
Politico:
Gibbs Stokes Dems' November Anxiety. Robert Gibbs says he merely “stated the obvious” in predicting Republicans could win control of the House in November. But Democratic strategists are privately grumbling that the White House press secretary gift-wrapped a bludgeon and handed it to the GOP. “It was the dumbest thing in the world to do,” one major Democratic money-bundler told POLITICO. “Barack Obama doesn’t understand this [election] is a referendum on his agenda.” Gibbs’ perhaps too-candid remarks about losing the House has exacerbated Democratic anxieties about the prospect of fighting a political war on two fronts, against Republicans and their own White House.
Group to Oppose Obama Mideast Policy. Leading conservatives will launch a new pro-Israel group this week with a scathing attack on Rep. Joe Sestak, the Democratic Senate candidate in Pennsylvania, the first shot in what they say will be a confrontational campaign against the Obama administration’s Mideast policy and the Democrats who support it. The Emergency Committee for Israel’s leadership unites two major strands of support for the Jewish state: The hawkish, neoconservative wing of the Republican Party, many of whom are Jewish, and conservative Evangelical Christians who have become increasingly outspoken in their support for Israel.
Reuters:
Whitman Takes Lead in Poll for California Governor. Republican Meg Whitman on Monday took the lead over Democrat Jerry Brown for the first time in a general election poll, four months before voters go to the polls to chose the next California governor. Whitman, the former CEO of eBay Inc making her first run for political office, leads Brown, the state's attorney general, by a margin of 46 percent to 39 percent, according to the survey by CBS-5 KPIX TV.
NYSE Short Interest Drops from Year High. Short interest on the New York Stock Exchange fell from its highest level in almost a year in late June, the exchange said on Monday, with further falls seen ahead following the best week for stocks in a year. Short interest on the NYSE fell 2.7 percent to 14.08 billion shares in late June, while on the Nasdaq it held steady, rising just 0.1 percent to 7.39 billion shares.
Novellus Systems(NVLS) Q2 Beats Wall Street. Novellus Systems Inc (NVLS), which provides equipment for the semiconductor industry, posted quarterly results above expectations, helped by a surge in bookings and shipments. For the second quarter, the chip-gear maker reported net income of $63.3 million, or 66 cents per share, compared with a loss of $50 million, or 55 cents per share, a year ago.
Telegraph:
Twelve Killed as Violence Spreads to Northern Afghanistan. At least 11 police officers and a government official were killed in three separate insurgent attacks in increasingly restive provinces of northern Afghanistan. The deaths came as an Afghan rights group said escalating violence in the country was now the worst since the early months of the nearly 9-year-old war.
Financial Times Deutschland:
Lawmakers in German Chancellor Angela Merkel's CDU/CSU bloc are considering introducing stricter tax rules for the country's banks, citing members of the bloc. Lawmakers may seek to prevent lenders from setting up "bogus banks" in tax havens, the newspaper said.
More than half of Chinese textile companies may go bankrupt if the yuan appreciates 5% against the U.S. dollar, citing Gao Young, vice president of the China National Textile and Apparel Council
China Business News:
China needs to "normalize" monetary policy to stabilize economic growth, Wu Xiaoling, a former People's Bank of China deputy governor, said. Wu called last year's policy "extremely loose," the report said.
Evening Recommendations Citigroup:
Rated (WLP) Buy, target $58.
Rated (GTS) Buy, target $25.
Rated (HNT) Buy, target $30.
Rated (OCLR) Buy, target $16.50.
Night Trading
Asian equity indices are -.50% to +.25% on average.
Asia Ex-Japan Investment Grade CDS Index 128.0 +2.0 basis points.
Asia Pacific Sovereign CDS Index 125.50 +1.75 basis points.
The Trade Deficit for May is estimated at -$39.0 Billion versus -$40.3 Billion in April.
2:00 pm EST
The Monthly Budget Deficit for June is estimated at -$69.4 Billion versus -$94.3 Billion in May.
Upcoming Splits
None of note
Other Potential Market Movers
The NFIB Small Business Optimism Index, $21 Billion 10-Year Treasury Notes Auction, weekly retail sales reports, SEMICON West, ABC Consumer Confidence Reading, IBD/TIPP Economic Optimism Index, (LRCX) analyst meeting, (KLAC) analyst meeting and the (DLM) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by real estate and commodity shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 112.02 bps -.59%
European Financial Sector CDS Index 124.04 bps +5.66%
Western Europe Sovereign Debt CDS Index 120.0 bps -2.57%
Emerging Market CDS Index 246.67 bps +.11%
2-Year Swap Spread 31.0 unch.
TED Spread 38.0 unch.
Economic Gauges:
3-Month T-Bill Yield .14% -1 bp
Yield Curve 241.0 -1 bp
China Import Iron Ore Spot $118.10/Metric Tonne -3.04%
Citi US Economic Surprise Index -17.20 +2.4 points
10-Year TIPS Spread 1.84% +1 bp
Overseas Futures:
Nikkei Futures: Indicating +62 open in Japan
DAX Futures: Indicating +14 open in Germany
Portfolio:
Higher: On gains in my Retail and Technology long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is neutral as the S&P 500 trades flat, notwithstanding the decline in the euro, fall in commodities and recent stock gains. On the positive side, Road & Rail, Restaurant, Wireless, Disk Drive, Semi, Software and Internet stocks are especially strong, rising .75%+. The MS Tech Index is strongly outperforming, rising +.75%. (XLF)/(IYR) trade pretty well considering last week's gains. The 10-year yield is flat, but near session highs. The Western Europe Sovereign CDS Index is building on last week's sharp losses, which is a major positive. Moreover, the US Muni CDS Index is falling another -4.6% to 235.50 bps, which is also a big positive. On the negative side, Education, Biotech, Steel, Gold, Oil Tanker, Alt Energy, Coal and Defense shares are falling 1.25%+. China Import Iron Ore Spot prices continue to decline at a rapid rate. As well, Shanghai copper inventories, which had been declining, jumped +14.2% today. The European Financial Sector CDS Index is rebounding a bit after last week's sharp drop, which is also a negative. Overall, various key cds indices trade well considering last week's sharp drops. Today's quiet equity action appears to be a healthy consolidation of last week's sharp gains. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less real estate sector pessimism, falling sovereign debt angst, lower energy prices, bargain-hunting and diminishing economic fear.
