North American Investment Grade CDS Index 100.23 bps -.55%
European Financial Sector CDS Index 90.66 bps -4.49%
Western Europe Sovereign Debt CDS Index 110.33 bps -1.80%
Emerging Market CDS Index 206.80 bps +.80%
2-Year Swap Spread 16.0 -1 bp
TED Spread 30.0 unch.
Economic Gauges:
3-Month T-Bill Yield .14% unch.
Yield Curve 237.0 -3 bps
China Import Iron Ore Spot $142.80/Metric Tonne +1.13%
Citi US Economic Surprise Index -33.80 +.2 point
10-Year TIPS Spread 1.83% -1 bp
Overseas Futures:
Nikkei Futures: Indicating -49 open in Japan
DAX Futures: Indicating -4 open in Germany
Portfolio:
Slightly Higher: On gains in my Biotech and Medical long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades just slightly lower, despite more weak economic data, recent stock gains and weakness in Shanghai overnight. On the positive side, HMO, Drug, Computer Service, Networking, Gold and Hospital stocks are especially strong, rising .5%+. The European Investment Grade CDS Index is falling another -3.63% today to 91.83 bps. The European Financial Sector CDS Index is now at the lowest level since April 26th, which is a major positive. The UK sovereign cds is falling -6.6% to 55.75 bps, which is the lowest since Nov. 13th, 2009. Weekly retail sales rose +2.9% this week versus a +2.8% gain the prior week, which is also a positive given recent consumer sentiment readings. On the negative side, Airline, Education and Homebuilding shares are under meaningful pressure, falling 2.0%+. Cyclicals are underperforming, with the Transports falling -1.3%. Lumber is falling -4.0%. The 10-year yield is falling -6 bps, which is a mild negative. I would classify today's mild setback as a consolidation of recent gains. Tomorrow's ADP employment report and jobless claims on Thur. take on added importance ahead of Friday's jobs report. I suspect the major averages make another attempt to push higher before week's end. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, technical buying, mostly positive earnings reports and bargain-hunting.
High-Yield Default Swaps Gauge Falls to 13-Week Low in Europe. The cost of protecting European corporate bonds from default fell, with a gauge of high-yield company debt risk dropping to the lowest level in 13 weeks. The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly junk credit ratings declined 6.5 basis points to 451, the lowest since May 4, according to JPMorgan Chase & Co. at 12 p.m. in London. The Markit iTraxx Europe Index of swaps on 125 companies with investment-grade ratings dropped 1.5 basis points to 98, the lowest since May 13, JPMorgan prices show. The cost of protecting bank bonds from default fell to the lowest since April 21, with the Markit iTraxx Financial Index of 25 banks and insurers down 1.75 at 108.5 and the subordinated index 3 lower at 173.5. The cost of insuring against losses on government debt also fell. Contracts on Greece dropped 15 basis points to 711.5, Portugal declined 2 to 219, Spain decreased 1.5 to 179, Italy fell 1 to 130 and Ireland was 6 lower at 203, CMA prices show.
U.S. Economy: Consumer Spending Stagnates, Home Sales Retreat. Consumer spending, pending home sales and factory orders were all weaker than projected in June, showing the U.S. recovery lost momentum heading into the second half of the year as employment stagnates. Household purchases, which account for about 70 percent of the economy, were unchanged from May, according to figures from the Commerce Department issued today in Washington. Contracts to buy existing houses unexpectedly dropped for a second month and factory bookings fell more than twice as much as economists estimated, other reports showed. The savings rate for American households increased to 6.4 percent, the highest level since June 2009, to $725.9 billion. The index of pending home resales dropped to 75.7, the lowest level since data began in 2001, figures from the National Association of Realtors showed.
MasterCard(MA) Profit Rises as Travel Spending Increases. MasterCard Inc., the world’s second- biggest payments network, posted a 31 percent increase in second-quarter profit as consumers used their cards more while traveling beyond their home countries. Net income rose to $458 million, or $3.49 per diluted share, compared with $349.1 million, or $2.67, a year earlier, the Purchase, New York-based company said today in a statement. The average estimate of 31 analysts surveyed by Bloomberg was for earnings per share of $3.34. “I feel optimistic about our future growth prospects,” Banga said today in a conference call with analysts. “The majority of our revenues come from outside of the United States, which as of now is showing faster growth.” Worldwide spending on MasterCard credit and debit cards climbed 7.9 percent to $493 billion, when adjusting for currency fluctuations, driven by 21 percent growth in Latin America, 15 percent in the Asia-Pacific, Middle East and Africa and 13 percent in Europe, MasterCard’s second-biggest market outside the U.S. Total card spending in the U.S. climbed 0.7 percent.
New York Hedge-Fund Manager Tax Likely to Fail, Paterson Says. New York’s Senate is unlikely to enact a plan to raise $50 million a year by taxing hedge fund managers who commute into the state, Governor David Paterson said. The proposal led Governor Jodi Rell of neighboring Connecticut to offer relocation assistance to New York-based fund executives who leave for her state. The New York Post reported that Rell held a dinner for representatives of 15 financial firms in Darien, Connecticut, on Aug. 2. “You have my promise to do all I can to help,” she said in a July 16 letter to the New York Hedge Fund Roundtable, a trade group.
Oil Rises to Three-Month High Above $82 Before U.S. Supply Data. Oil rose to a three-month high in New York as the dollar weakened and analysts forecast that crude inventories declined last week in the U.S. Crude oil for September delivery climbed as much as 76 cents, or 0.9 percent, to $82.10 a barrel, in electronic trading on the New York Mercantile Exchange, the highest level since May 5.
Europe's Abandoned Edifices Spell Trouble for Lafarge, Builders. The delayed revamp of Berlin’s Stadtschloss palace and a wobbly $8 billion bridge project in Sicily are setting off investor alarm bells that Europe’s building industry will bear the brunt of state spending cuts. “We’re expecting construction stocks to remain very much under pressure and sluggish for the next six months,” said Franck Nicolas, head of global asset allocation at Paris-based Natixis Asset Management, which oversees 309 billion euros ($400 billion) of investments. “Budgetary austerity won’t quicken the end of the crisis.”
North Korea Threatens 'Physical Retaliation' Against Naval Drills. North Korea’s military warned it may make a “physical retaliation” against South Korean naval ships carrying out military drills near their disputed border later this week, and told all shipping to avoid the area. South Korea plans to stage anti-submarine exercises for five days starting Aug. 5 to improve the nation’s defenses. The South says a North Korean torpedo sank one of its warships in March, killing 46 sailors. he maneuvers by South Korea “are not simple drills but undisguised military intrusion into the inviolable territorial waters of” the North, state-run Korea Central News Agency said, citing the army. “It is the unshakable will and steadfast resolution of the army and people of the DPRK to return fire for fire,” it said, using the initials of the North’s official name.
Goldman Sachs(GS) Offers More Power to AAA Holders in CMBS Deal. Goldman Sachs Group Inc. is offering to give investors in the highest-rated portions of a bond sale backed by commercial mortgages control in the event the loans go bad as bankers attempt to revive the market. The $788.5 million offering gives holders of the safest portion of the transaction, or about 81 percent of the deal, the power to direct and replace firms hired to handle loans that become troubled, according to marketing documents distributed last week to investors. Typically, that right is held by investors who buy the smaller, riskiest slice. It’s “plowing new ground,” said Patrick Sargent, a partner at Dallas law firm Andrews & Kurth LLP. Goldman Sachs is attempting to address concern that holders of the riskiest pieces of commercial mortgage bonds in the $700 billion market may make decisions that favor their interest over other investors in the transactions when loans sour. “This is a big nod to the AAA buyers,” Lisa Pendergast, a strategist at Jefferies & Co. in Stamford, Connecticut, said in an interview.
Israeli Officer, Lebanese Soldiers Killed on Border. Israeli and Lebanese soldiers exchanged fire in the most serious border incident since a monthlong conflict in 2006, leaving an Israeli battalion commander, two Lebanese soldiers and a local journalist dead. Another Israeli officer was critically wounded in the fighting, Major-General Gadi Eisenkot, head of Israel’s Northern Command, said on Army Radio. In addition to the Lebanese deaths, 15 soldiers and civilians from Lebanon were injured, said a Lebanese Army spokesman, who commented on condition of anonymity due to military regulations.
New Drilling Rules Imperil Some Rig Operators. Higher costs arising from tough new rules for the offshore-oil industry prompted by the Gulf of Mexico oil spill could pose a serious threat to contractors with older fleets of drilling rigs. Legislation designed to prevent a repeat of the Deepwater Horizon accident sets minimum safety standards for well design and requires oil companies to use an enhanced type of blowout preventer, or BOP, the device which failed to control BP PLC's rogue well. But many drilling rigs are too small to accommodate newer and bigger BOPs, and it will cost billions of dollars to upgrade them all.
Commission Clears Way for Ground Zero Mosque. The New York City Landmarks Commission unanimously voted Tuesday to deny landmark designation to the site of the proposed mosque near Ground Zero, paving the way for the controversial community center and worship space to rise two blocks from the site of the Sept. 11, 2001, terrorist attacks.
CNBC:
Hedge Fund Merger to Reunite Star Traders. Two hedge funds that were both started by former star traders at Goldman Sachs are to merge in a deal that marks one of the biggest steps over the past year in the long-anticipated consolidation of the industry. New York-based TPG-Axon, one of the world’s biggest hedge funds, has agreed a deal to merge with UK-based Montrica Investment Management, one of London’s largest hedge funds specialising in trading on events such as takeovers.
MarketWatch:
Microsoft(MSFT) and Ballmer Under Fire. A firestorm is raging through the media and the blogosphere these days over Microsoft Corp. Chief Executive Steve Ballmer and whether or not it's time for him to go.
NY Hedge Funders Wined and Dined by Connecticut Governor. Several New York hedge-fund honchos crossed the border last night for a date with the governor of Connecticut to talk about moving in with her. Representatives of 15 city-based financial firms were lured to a private meeting in Darien with Gov. Jodi Rell to hear her pitch to move their businesses to the Nutmeg State -- and avoid a tax on their industry that's being considered in New York.
Apple(AAPL) Pushes Forward With Streaming Video Plans. The latest evidence that Apple will soon begin streaming video comes from CNET, which reports that the consumer electronics manufacturer is putting its resources behind a cloud-based video service. The report comes as Apple has transitioned many on the team from online music service Lala to work on streaming video instead. Apple acquired Lala in December of last year, but shortly thereafter shut down the streaming music service. Now it seems that Lala’s technology and personnel are being used to build a cloud-based video service, which could replace Apple’s current system for downloading movies and TV shows. The rollout of Apple’s streaming video service could coincide with the introduction of the next version of Apple TV, which is expected to be sold for around $99.
LA Times:
Bell Withholds Public Records. Despite vowing greater transparency in the wake of a salary scandal, the city of Bell is refusing to turn over public records to The Times, community activists and even a sitting councilman. "They continue to keep us in the dark," said Councilman Lorenzo Velez, who has been critical of the high salaries paid to top Bell administrators and other City Council members. "The problem is a continuation of so many years of doing whatever they wanted in City Hall."
Referendum in Missouri: Will the Show-Me State Show Up Obamacare? Missouri voters go to the polls Tuesday for the first-in-the-nation referendum on President Obama's health care plan. It is likely to give Republicans a chance to brag about the unpopularity of Obamacare, but the vote will be largely symbolic. Courts will eventually decide whether Missouri and other states can legally trump federal law and exempt citizens from the mandate to buy insurance. But sending a signal to Washington will be victory enough for the Republicans and Tea Party activists pushing Proposition C.
Rasmussen Reports:
67% Say Disclosure of Afghanistan War Secrets Hurts U.S. National Security. The Obama administration is wrestling with the illegal disclosure on the Internet of thousands of secret documents related to the war in Afghanistan, and 67% of U.S. voters believe the release of this kind of information hurts national security. A new Rasmussen Reports national telephone survey finds that just 19% believe media outlets that release secret government documents relating to the war in Afghanistan are providing a public service.
Politico:
The Lame Duck Looms. As Congress heads home for August, Republicans and conservative activists have a new rallying cry to energize voters: Fear the Lame Duck! With dark warnings, GOP members of Congress and right-wing media figures are suggesting that the Democratic majority could use a post-election session of Congress to jam through tax increases, cap and trade, immigration reform and legislation making it easier for unions to organize workers. The campaign began with a John Fund column in the Wall Street Journal, which was picked up by the heavily trafficked Internet gateway The Drudge Report early last month and gained steam when columnist Charles Krauthammer sounded the alarm not long after. Now the GOP is rallying around the perceived threat of a lame-duck session.
Real Clear Politics:
A Bleak Picture of Government Debt. Rumors of Congressional Democrats privately expressing disapproval of the Obama administration's actions and policies have been given more credence by such things as House Speaker Nancy Pelosi's public criticism of White House spokesman Robert Gibbs. But when two long-time Democratic pollsters, Patrick Caddell and Douglas Schoen, called President Obama "cynical" and "racially divisive," that was a dramatic statement. It was like saying that the emperor has no clothes.
Reuters:
U.S. Authorities Able to Tap Blackberry Messaging. The BlackBerry -- renown for the security of its messaging -- doesn't offer 100 percent protection from eavesdropping. At least not in the United States. U.S. law enforcement officials said they can tap into emails and other conversations made using the device, made by Research in Motion, as long as they have proper court orders.
IBM(IBM) Bond Sale Signals Rally Strengthening as Ford Raised: Credit Markets. International Business Machines Corp. raised $1.5 billion at the lowest interest rate on record as the credit rally that began in June extended into August on investor confidence the economy won’t slip back into recession. “Even though the economy isn’t working to its fullest capacity, a lot of investors are feeling that if companies are capable of turning in decent earnings, then they’re able to manage themselves to this low-growth environment,” said Arthur Tetyevsky, chief U.S. credit strategist at Gleacher & Co. in New York. Borrowers sold $12.9 billion of U.S. corporate bonds yesterday, according to data compiled by Bloomberg. Citigroup Inc. issued $3 billion of notes, following July sales by Goldman Sachs Group Inc. and JPMorgan Chase & Co.
Slowing steel demand in China, the world's largest consumer of the metal, led 40% of mills in the nation to cut output or put plants on maintenance, Luo Bingsheng, vice chairman of the China Iron & Steel Association said today.
Greece Passes First Deficit-Reduction Test as Budget Challenges Increase. Greece’s austerity drive may pass its first test this week as a European Union-led mission prepares to dole out more rescue funds for a government trying to cut the euro-region’s second-biggest budget gap and weather a recession. In approving the second tranche of a three-year, 110 billion-euro ($145 billion) bailout, the EU and International Monetary Fund are likely praise Greece’s progress and say that more work is needed to lock in the gains, economists said. Greece is battling the highest inflation rate in the 27-nation EU, revenue is trailing targets and the EU and IMF forecast the economy will shrink as much as 4 percent this year. Prime Minister George Papandreou has raised taxes, cut wages and overhauled the state-run pension system, while braving months of strikes against the measures that helped shrink the budget gap by 45 percent in the first half. Sustaining the effort and qualifying for another 9 billion euros of EU-IMF funds will be complicated by a recession that has been deepened by his steps.
Dendreon's(DNDN) $93,000 Cancer Drug Price Must Be Paid by U.S., Doctors Say. Dendreon Inc.’s $93,000 price tag for its Provenge prostate cancer treatment must be covered under the rules of the U.S. Medicare health plan, according to a letter submitted by the American Society of Clinical Oncology. The Centers for Medicare & Medicaid Services, the government agency that determines which treatments will be reimbursed, is required by the Social Security Act to pay for all cancer drugs approved by U.S. regulators, the cancer society said in a public letter submitted to the agency. Provenge won marketing rights in the U.S. in April, becoming the first drug designed to train the body’s immune system to fight cancer.
Genzyme(GENZ) Said to Talk With Sanofi After Getting Buyout Bid. Genzyme Corp., the world’s largest maker of medicines for genetic diseases, has begun takeover talks with Sanofi-Aventis SA after receiving a proposal from the French drugmaker last weekend, according to a person with knowledge of the matter. The talks between Genzyme, of Cambridge, Massachusetts, and Paris-based Sanofi are ongoing, said the person, who declined to be identified because the discussions are private. Genzyme’s shareholders are looking for an offer above $80 per share, the person said. Genzyme rose as much as 2.5 percent in extended trading after the close of the Nasdaq Stock Market.
Treasury Two-Year Yields Fall to Record on Bets Fed Plans to Spur Growth. Treasury two-year yields extended their decline to record lows as traders bet the Federal Reserve will introduce additional measures to keep borrowing costs low as soon as its next meeting on Aug. 10 to boost the economy. Ten-year notes rose, snapping a decline from yesterday, before a government report that analysts said will show personal income and spending cooled in June, a sign the economy is slowing. The London interbank offered rate, which banks pay for dollar loans, is tumbling partly because of speculation the Fed will start buying bonds again, Anthony Crescenzi of Pacific Investment Management Co. said in a report. “More and more people are looking for additional easing at the meeting,” said Tomohisa Fujiki, an interest-rate strategist at BNP Paribas Securities Japan Ltd. in Tokyo.
Wall Street Journal:
Fed Mulls Symbolic Shift. Federal Reserve officials will consider a modest but symbolically important change in the management of their massive securities portfolio when they meet next week to ponder an economy that seems to be losing momentum. Officials to Consider Putting More Money Into Bond Market as Recovery Wavers. The issue: Whether to use cash the Fed receives when its mortgage-bond holdings mature to buy new mortgage or Treasury bonds, instead of allowing its portfolio to shrink gradually, as it is expected to do in the months ahead. Any change—only four months after the Fed ended its massive bond-buying program—would signal deepening concern about the economic outlook. If the Fed's forecast deteriorates significantly, it could also be a precursor to bigger efforts to pump money into the economy. Moving to stop the Fed's portfolio from shrinking would prevent monetary policy from slightly tightening in the face of a weakening recovery. The central bank's $2.3 trillion portfolio has nearly tripled in size since 2007. Buying new bonds with this stream of cash from maturing bonds—projected at about $200 billion by 2011—would show the public and markets that the Fed is seeking ways to support economic growth. It could also be a compromise that rival factions at the Fed support, as officials differ about whether and how to address a subpar recovery. Officials in the Fed's anti-inflation camp aren't convinced the economy is slowing significantly and are wary of taking new actions. Others are eager to consider new steps to address recent signs of a slowdown and persistent high unemployment. Fed officials aren't yet prepared to take the larger step of resuming large-scale purchases of mortgage-backed securities or U.S. Treasurys. But they are holding open that option if the economy deteriorates. Private forecasters generally expect real GDP to grow by an annual rate of about 2¾% in the second half of 2010. If the picture deteriorates and they forecast growth falling below 2%, the Fed would be more likely to act.
Dual Role in Housing Deals Puts Spotlight on Deutsche(DB). Federal probes of the collapsed mortgage-bond boom are shedding light on how Wall Street firms sometimes created securities and sold them to one set of investors, while advising others to bet against them. One firm that was a major player in mortgage securities, Deutsche Bank AG, illustrates a pattern investigators are looking at. While creating and selling mortgage securities to some of its clients, the big German bank was not only advising other clients to bet the other way, but also sometimes doing so itself. A Deutsche trader helped create an index that made it easy to bet against housing, and the bank itself then used the index to do just that.
CNBC:
Gold Miner Kinross(KGC) to Buy Red Back for $7 Billion. Gold miner Kinross Gold said it will buy the 91 percent of Red Back Mining that it does not already own for around $7 billion to create one of the world's largest gold miners.
Upcoming 'Kill' Attempt Might Do the Trick Alone: BP(BP). After insisting for months that a pair of costly relief wells were the only surefire way to kill the oil leak at the bottom of the Gulf of Mexico,BPofficials said Monday they may be able to do it just with lines running from a ship to the blown-out well a mile below.
Small Business Optimism Plunges: Firms See Lower Spending and More Layoffs Ahead. (graphs) The latest Wells Fargo/Gallup small business survey is out and it's UGLY. In keeping with other indications that the state of small business is very bad, the survey indicates a level of pessimism about future results that's worse even that during the worst of the crisis. What's more, small firms seem lower spending, lower cash flows, and lower headcount in the future.
Leak Suspect Had Been Disciplined at Least Twice Before Arrest. The leading suspect in the leaking of thousands of military documents to WikiLeaks had been disciplined at least twice in the previous three years but maintained his security clearance.
TheAppleBlog:
Report: Apple(AAPL) to Take Top Spot in Portable Computing Market Share. A new report suggests the iPad is behind Apple’s unprecedented growth in portable computers, defined as notebooks, netbooks, and tablets. Apple took third place in worldwide market share for the second quarter of 2010, and is on a trajectory to become number one as soon as the end of the year.
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 26% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-three percent (43%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).
Politico:
Ethics Office Details Charges Against Maxine Waters. An independent ethics office accused Rep. Maxine Waters of violating House conflict-of-interest rules by intervening on behalf of a minority-owned bank in which her husband held $250,000 worth of stock, according to a report released Monday by the House ethics committee as part of its preparation for a "trial" of the California Democrat. The report, written in August 2009 by the Office of Congressional Ethics, became the basis of a full-scale investigation of Waters by the ethics committee. A special bipartisan investigative panel of the committee has found "substantial reason to believe" that Waters violated House rules. Waters, the No. 3 Democrat on the Financial Services Committee, has vehemently denied any wrongdoing. She is choosing to go to trial rather than admit violating ethics rules through a plea.
Reuters:
House Subcommittee Chair Backs Comcast(CMCSA) - NBC Deal. A lawmaker who chairs the U.S. House of Representatives' communications subcommittee is urging regulators to approve Comcast Corp's purchase of a controlling stake in NBC Universal, as long as consumers still have access to a wide array of video programing.
Reversal of Fortune as Falcone's Hedge Fund Drops. In the span of seven months, hedge fund manager Philip Falcone has gone from being one of the industry's better performers to one of its worst, according to new industry data. As of July 15, Falcone's Harbinger Capital Partners Offshore Fund I was down 10.7 percent, ranking the New York-based fund manager one of the industry's 20 worst performers, according to HSBC. Harbinger began the year with bang, with the offshore fund registering a 4.42 percent gain as of Jan. 15. And the fund was in positive territory up until a few weeks ago. Over the course of the year, the portfolio's assets under management have been nearly cut in half, falling from $6.7 billion to $3.8 billion as of mid-July. The firm also has a pool of hard-to-sell assets called a side-pocket with about $2 billion which lost roughly 14 percent in the first seven months of the year.It is not clear what has caused the big reversal of fortune at Harbinger. Several calls for comment to the firm were not immediately returned.
Global Credit Conditions Improved in July - Kamakura. The number of companies globally that are at risk of defaulting on their debt fell again in July, continuing a global trend that has seen most companies improve their credit profile, risk management firm Kamakura Corp said on Monday.
Economic Times:
BlackBerry to Open Code for Security. Research in Motion Ltd.(RIMM) agreed for the first time to allow Indian security agencies to monitor its Blackberry services in a bid to avoid a government ban, citing telecom dept. documents. The company offered to share technical codes for corporate e-mail services and open access to all consumer e-mails within 15 days.
Securities Times:
China's central bank in October may increase the amount of reserves the nation's banks are required to keep, citing officials from the banking industry.
Evening Recommendations Citigroup:
Reiterated Buy on (VRSN), lowered target to $36.
Night Trading
Asian equity indices are -.50% to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 109.0 -10.0 basis points.
Asia Pacific Sovereign CDS Index 111.0 -5.5 basis points.
Personal Income for June is estimated to rise +.2% versus a +.4% gain in May.
Personal Spending for June is estimated to rise +.1% versus a +.2% gain in May.
The PCE Core for June is estimated to rise +.1% versus a +.2% increase in May.
10:00 am EST
Factory Orders for June are estimated to fall -.5% versus a -1.4% decline in May.
Pending Home Sales for June are estimated to rise +4.0% versus a -30.0% decline in May.
Afternoon
Total vehicle sales for July are estimated to rise to 11.6M versus 11.08M in June.
Upcoming Splits
None of note
Other Potential Market Movers
The weekly retail sales reports, ABC Consumer Confidence reading, (NATI) Investor Conference and the (GLW) Investor Luncheon could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology 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 100.78 bps -3.91%
European Financial Sector CDS Index 93.83 bps -5.81%
Western Europe Sovereign Debt CDS Index 112.33 bps -2.25%
Emerging Market CDS Index 206.40 bps -3.35%
2-Year Swap Spread 17.0 unch.
TED Spread 30.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .14% unch.
Yield Curve 240.0 +5 bps
China Import Iron Ore Spot $136.30/Metric Tonne unch.
Citi US Economic Surprise Index -34.10 +3.3 points
10-Year TIPS Spread 1.84% +7 bps
Overseas Futures:
Nikkei Futures: Indicating +165 open in Japan
DAX Futures: Indicating +9 open in Germany
Portfolio:
Higher: On gains in my Biotech, Medical, Technology and Retail long positions
Disclosed Trades: Added to my (MOS) 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 breaks up through its 200-day moving average despite weaker manufacturing gauges in the US/China. On the positive side, Gaming, REIT, Construction, HMO, Bank, Computer, Steel, Ag, Oil Service, Energy and Coal stocks are especially strong, rising 3.0%+. (IYR)/(XLF) have traded well throughout the day. The S&P GSCI Ag Spot Index is rising another +1.2% today. Copper also continues to trade well, rising another +2.34%. Lumber is jumping another +2.8%. The European Investment Grade CDS Index is falling -5.6% today to 94.33 bps. The Hungary sovereign debt cds is dropping -3.8% to 319.44 bps and the US Muni CDS Index is falling another -4.33% to 198.88 bps. On the negative side, gold and hospitals shares are substantially underperforming. The 10-year yield is only rising +5 bps, which isn't as much as I would have expected given the magnitude of today's equity rally, which is a mild negative. I suspect investment manager performance angst will begin to surface again pretty soon, which could lead to further near-term gains after a brief pause. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, technical buying, mostly positive earnings reports, diminishing financial sector pessimism and bargain-hunting.
