North American Investment Grade CDS Index 90.37 bps -1.77%
European Financial Sector CDS Index 117.66 bps +4.89%
Western Europe Sovereign Debt CDS Index 174.33 bps +1.06%
Emerging Market CDS Index 204.18 bps unch.
2-Year Swap Spread 30.0 +8 bps
TED Spread 16.0 unch.
Economic Gauges:
3-Month T-Bill Yield .12% unch.
Yield Curve 222.0 -1 bp
China Import Iron Ore Spot $161.0/Metric Tonne +.44%
Citi US Economic Surprise Index +35.90 -.2 point
10-Year TIPS Spread 2.14% +3 bps
Overseas Futures:
Nikkei Futures: Indicating -16 open in Japan
DAX Futures: Indicating +23 open in Germany
Portfolio:
Slightly Lower: On losses in my Tech and Medical long positions
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is just mildly bearish as the S&P 500 trades well off session lows despite recent sharp equity gains, overseas equity weakness, tech sector earnings worries and rising euro sovereign debt angst. On the positive side, Airline, Gaming, Restaurant, Homebuilding, Construction, Hospital, Biotech, Gold, Oil Service, Energy, Oil Tanker and Coal shares are especially strong, rising more than .50%. Small-Cap and cyclical shares are outperforming. The Transportation Index is also slightly higher on the day. Copper is rising +1.55% despite euro weakness. Lumber is also rising +.69%. On the negative side, Networking, Semi, Computer, Internet and Defense shares are under pressure, falling more than 1.0%. Shanghai copper inventories are surging another +9.35% today and are now at the highest level since late May, rising +24.2% in 5 days. The Portugal sovereign cds is gaining +3.53% to 483.0 bps. The Emerging Markets Sovereign Debt CDS Index is jumping 9.7% to 199.25 bps. Moreover, other key global cds indices continue to surge higher, which is a large negative. As well, the 2-year Swap spread has broken out technically, which is also a negative. Stocks remain very resilient despite today headline losses as the bears remain unable to gain significant traction. An unusual number of stocks are gaining on good volume today given the losses in the major averages and overall stock/sector breadth isn't bad. I expect US stocks to trade modestly higher into the close from current levels on short-covering, less economic fear, seasonal strength and technical buying.
Portuguese, Irish Debt Lead Peripheral Drop on Budget Concern. Irish government bonds tumbled for a 13th day on mounting concern that the nation will be forced to restructure its finances. Spanish bonds also headed for a 13th day of declines as data showed the nation’s economic growth stalled. French Finance Minister Christine Lagarde said yesterday that investors must share in the cost of safeguarding sovereign debt. "Lagarde’s comments mentioned restructuring, and that’s another nail in the coffin” for so-called peripheral nations’ debt, said Steven Major, global head of fixed-income research at HSBC Holdings Plc in London. “There’s still a big constituency of investors and traders who have not recognized until now that restructuring could happen.” The yield on the Irish 10-year bond added 31 basis points to 9.07 percent at 4:18 p.m. in London. The Irish spread over bunds reached an all- time high of 652 basis points, or 6.52 percentage points, Bloomberg generic data shows. The cost to insure Irish government debt against default rose 20 basis points to a record 617, according to data provider CMA, using credit-default swap prices. CDS’s on Portugal added 17 basis points to 494 and Spain’s rose 12 to 289.
Commercial-Mortgage Debt Prices to Rise in 2011 as Low Rates Spur Buying. Prices of commercial-mortgage backed securities will keep rising as buyers seek higher-paying investments with benchmark interest rates near zero, according to Lisa Pendergast, a strategist at Jefferies & Co. “Something is going to have to break to prevent investors from pouring money into CMBS,” Pendergast said during a panel discussion yesterday at Bloomberg headquarters in New York. “We are already starting to see mini-bubbles form.”
Fed Easing Seen Ineffective by 75% in Global Poll Favoring ECB. Global investors doubt the Federal Reserve’s plan to buy more Treasury securities will boost the U.S. economy or bring down unemployment and say they believe the government is pursuing a weak-dollar policy, a poll shows. Three-quarters of those surveyed say the central bank’s securities purchases -- or quantitative easing -- will have little or no effect on joblessness, according to the latest quarterly Bloomberg Global Poll of 1,030 investors, analysts and traders who are Bloomberg subscribers. More than half say the Fed’s action won’t increase U.S. growth over the next year. Global investors do think the Fed will have some success in lifting inflation, another goal. Half expect inflation to rise modestly as a result of the central bank’s actions. One in five say the Fed will get more than it’s hoping for and that inflation will increase to dangerous levels. Seven of 10 respondents say the U.S. is deliberately keeping the dollar low against other currencies, while only one in four think it’s letting the market decide the value of the greenback, according to the survey conducted Nov. 8 by Selzer & Co., a Des Moines, Iowa-based firm. The results of the poll underscore complaints by officials from China, Germany and Brazil, who say the Fed’s Treasury- purchase plan may jar other economies while failing to fuel U.S. growth. German Finance Minister Wolfgang Schaeuble called the move “clueless” and suggested it was aimed at driving down the dollar. Poll respondents are also worried about U.S. fiscal policy. More than three in five say there’s a moderate or big risk that the budget deficit will provoke a crisis of confidence and a dramatic rise in long-term interest rates in the next two years. Bernanke’s standing among investors has fallen. Just over 60 percent view the chairman favorably in the latest poll, compared with 71 percent who felt that way in September. U.S. Treasury Secretary Timothy Geithner is seen favorably by 44 percent of respondents against 47 percent who rate him unfavorably.
Goldman(GS) Tells Investors to Exit China Stock Bet. Goldman Sachs Group Inc. recommended clients exit a bet that Hong Kong-listed companies in China will gain on concern the central bank will raise borrowing costs to tame inflation. China’s annual inflation rate jumped to a two-year high of 4.4 percent in October. Inflation is above policy makers’ “comfort zone” and more “tightening” will likely occur, the New York-based analysts wrote in the report. “The near-term risk-reward for this position also looks unappealing as we approach the year-end ‘roll-off,’” they said.
Grantham Says Fed Asset Purchases May Make Stocks 'Dangerously Overpriced'.Jeremy Grantham, chief investment strategist at Grantham Mayo Van Otterloo & Co., said the Federal Reserve’s attempt to boost the economy could push U.S. stocks to a level where they will be “dangerously overpriced.” The Fed’s decision to purchase Treasuries and flood markets with cheap money will drive investors out of cash and encourage them to speculate in stocks, which are already overvalued, Grantham said in an interview with the CNBC cable television network. “The S&P is already overpriced and if you push it up another 20 percent it becomes dangerously overpriced,” Grantham said in the interview, which was posted today on the network’s website. “In the not-too-distant future stocks will crack again.” The Fed’s policies also drive up commodity prices, create fears of inflation and heighten tensions with countries concerned that the decline in the value of the dollar will hurt their exports, said Grantham, whose Boston-based firm manages more than $94 billion. "We are in a currency war in a way,” Grantham said. “I hope it stays mild.”
Large Hedge Funds Are Riskier Than Perceived, Spring Mountain Capital Says. Investors who believe larger hedge funds offer more safety and better returns than their smaller rivals may be misguided, according to Spring Mountain Capital LP. Funds with more than $1.5 billion in assets generate an average of 0.2 percent a month less in alpha, or returns above market indexes, than smaller managers, the New York-based investment management firm said today in a report.
Cuts by Merkel, Cameron Win Investor Plaudits in Bloomberg Poll. Measures by German Chancellor Angela Merkel and British Prime Minister David Cameron to cut government spending and slash debt are making them standouts in the eyes of global investors. Merkel, 56, is viewed favorably by 68 percent of respondents in the latest Bloomberg Global Poll, top among a dozen world political and economic leaders cited in the survey. Cameron, 44, is second with a 65 percent worldwide favorability rating in the quarterly poll of 1,030 investors and analysts who are Bloomberg subscribers. The leader of Britain’s Conservative Party scored even better in Europe, where more than three-fourths of those questioned view him favorably. Lagging behind, U.S. President Barack Obama’s policies were viewed with optimism by 35 percent of the investors, followed by French President Nicolas Sarkozy with 30 percent and Japanese Prime Minister Naoto Kan with 16 percent.
Mortgage Rate for 30-Year U.S. Loans Falls to Record. U.S. mortgage rates dropped to a record low, the first decline in a month, as the Federal Reserve began a program to buy Treasury bonds to support the economy. The rate for a 30-year fixed loan fell to 4.17 percent in the week ended today from 4.24 percent, Freddie Mac said in a statement. That was the lowest level in the McLean, Virginia- based mortgage-finance company’s records dating to 1971. The average 15-year rate declined to 3.57 percent from 3.63 percent.
Activision(ATVI) Says 'Call of Duty: Black Ops' Sets Record Sales on First Day. Activision Blizzard Inc. said “Call of Duty: Black Ops,” the latest version of the best-selling video games, posted $360 million in sales in North America and the U.K. in 24 hours, a record for any entertainment property. Demand for “Black Ops” surpassed the previous record of $310 million in first-day sales set by last year’s “Call of Duty: Modern Warfare 2,” Santa Monica, California-based Activision said today in a statement.
GM Recalls 13,780 Buicks, Cadiallacs After Fire Reports. General Motors Co. is recalling 13,780 Buick Lucerne and Cadillac DTS cars in the U.S. because of a flaw that can cause power-steering fluid to leak and ignite a fire in the engine.
Human Genome(HGSI) May Be Takeover Target If U.S. Approves Lupus Drug Benlysta. Human Genome Sciences Inc. may become a takeover target if a lupus treatment it’s developing becomes the first such drug to win U.S. approval next month in more than a half century, analysts said. The safety and effectiveness of Benlysta, which the Rockville, Maryland-based biotech company is developing with GlaxoSmithKline Plc, will be the subject of a U.S. Food and Drug Administration staff report due tomorrow and an advisory panel meeting on Nov. 16. They expect a decision on approval by Dec. 9, and if the drug is cleared, sales may surpass $2.3 billion by 2014, according to the average estimate of four analysts surveyed by Bloomberg.
Daimler CEO: Electric Cars Are Overhyped. Daimler AG Chief Executive Dieter Zetsche said Thursday that expectations for the development of electric cars are over-optimistic and predicted returns for companies will be small. "In 10 years' time, the overall market share of electric cars is likely to be still in the single-digit percentage range," Mr. Zetsche said during a Daimler event in Stuttgart, according to a prepared statement.
CNBC:
Big Wave of Mortgage Resets May Not Be As Bad As Feared. The much-anticipated wave of adjustable-rate-mortgage resets—which are beginning to hit many homeowners now—may not be as devastating to the housing market as experts had feared.
FedEx(FDX) SmarPost to Drive Busiest Day in FedEx History. FedEx Corp. expects to see its busiest day in company history when it moves almost 16 million shipments around the world on December 13. This is a more than 11 percent increase from last year's busiest day when the company handled 14.2 million shipments. For the overall holiday season, FedEx is expecting a total volume increase of approximately 11 percent compared to 2009. FedEx forecasts more than 223.3 million shipments will move through its global networks between Thanksgiving and Christmas.
World PC Chip Sales Rise in 3rd Quarter: IDC. Worldwide personal computer chip shipments and sales revenue rose in the third quarter, but sequential gains were weaker than usual, an industry group said Thursday. Unit PC chip shipments grew 8.6%, while revenues increased 24.1%, according to IDC. Meanwhile, shipments grew 2.1% from the second quarter, while revenue rose 2.5% in the same period.
Obama Ready to Deal on Tax Cuts for the Wealthy. The White House signaled Wednesday that President Barack Obama is ready to cut a deal on the Bush-era tax cuts — accepting a temporary extension of the cuts for the wealthiest Americans to win renewal of tax breaks for middle-class taxpayers.
Democrat Phil Bredesen Want President Obama 'Mea Culpa'. President Obama should come back to the health care bargaining table with a “mea culpa” if Democrats want to have a meaningful conversation about improving the future of health care, a key Democratic governor tells POLITICO. The partisan way the health care overhaul was passed had “the seeds of its own destruction just built in,” Tennessee Gov. Phil Bredesen said in an interview Wednesday. “In a perfect world, I would love it if a president would say, ‘look I got off on the wrong foot here, we’re doing some things, let’s put something together, we all have the desire to cover more uninsured people and … I’m willing to say mea culpa and maybe we can get all these things right,” he said. “I’m very practical. I have no desire for my party to be a tragic Greek figure. I want us topass things that have broad enough support and staying power that they really change the way our society works for the better. I think we can get from here to there,” he said. “But it’s not just lining up behind what was passed and opposing all efforts. I think that’s just doomed to fail.”
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Thursday shows that 25% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-five percent (45%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20 (see trends).
Reuters:
Q+A - How High Can Copper Go After Record Peak? Copper hit a record high of $8,966 a tonne on Thursday, with sentiment stoked by strong economic data from top consumer China. The metal, used in power and construction, soared 140 percent last year and has gained 20 percent in 2010, due to a combination of fund buying, an improving economic and demand outlook, Chinese growth, supply worries and a weak dollar.
Amazon(AMZN) Pulls Book on Pedophilia After Complaints. Amazon has pulled an electronic book about pedophilia from its online store after complaints and a boycott threat, according to media reports on Thursday. The book, "The Pedophile's Guide to Love and Pleasure: a Child-lover's Code of Conduct," by Philip R. Greaves II, went on sale on Oct. 28 and cost $4.79 to download, the reports said.
Kohl's(KSS) Store Openings to Accelerate. Kohl's Corp is planning to open more stores in 2011 than it originally planned, citing more favorable conditions in the commercial real estate market.
DigiTimes:
Taiwan Makers Expected to Benefit From TriQuint(TQNT) Insufficient GaAs PA Capacity. International GaAs semiconductor supplier TriQuint Semiconductor has received orders for handset power amplifiers (PAs) far in excess of its capacity and therefore some of its clients are likely to shift orders to other makers, with this expected to benefit Taiwan-based OEM makers including Advanced Wireless Semiconductor and WIN Semiconductors, according to industry sources.
Europe Swaps Diverge From U.S. as Default Concern Spreads: Credit Markets. The cost of insuring company bonds in Europe against default is the highest relative to the U.S. since May as concern rises that the euro-region’s most indebted governments may need a bailout, further damaging the economy. The Markit iTraxx Europe Index of 125 investment-grade companies climbed to 103 basis points this week, compared with 92 basis points for the Markit CDX North America Investment Grade Index, according to Markit Group Ltd. Credit-default swaps on Ireland’s two biggest lenders, Bank of Ireland and Allied Irish Banks Plc, are soaring on doubts about the ability of the nation to refinance in the bond market. European credit is being weighed down as governments struggle to convince investors they remain viable amid taxpayer resistance to budget cuts and after Goldman Sachs Group Inc. raised the prospect of Ireland and Portugal failing under the weight of “oversized” debt piles. “The focus is back on peripheral Europe,” said Mark Dowding, a senior money manager at BlueBay Asset Management Plc in London, where he helps oversee $22 billion of investment- grade assets. “Keep your eye on Italy and Spain. If we see any weakness there, that’s what will drive weakness elsewhere.” Contracts on Banco Espirito Santo SA, Portugal’s largest publicly traded bank by market value, rose the most in the Markit iTraxx Europe Index, climbing 125 basis points to 539.75, while energy company Energias de Portugal SA had the second- biggest increase, jumping 68 to 313.
China's Inflation Accelerates to 4.4%, Fastest Pace in Two Years. China’s inflation accelerated to the fastest pace in two years in October, building the case for the central bank to add to last month’s interest-rate increase. Consumer prices rose 4.4 percent from a year earlier, boosted by food costs, a statistics bureau report showed in Beijing today. That was more than the 4 percent median forecast in a Bloomberg News survey of 28 economists. None forecast such a large gain. In September, prices rose 3.6 percent.
Bomb Timed to Explode Over Eastern U.S., Police Say. A bomb in a printer cartridge sent from Yemen that was intercepted at the U.K.’s East Midlands airport was timed to explode over the U.S. East Coast, London’s Metropolitan Police said. “Forensic examination has indicated that if the device had activated,” it would have been at 5:30 a.m. New York time on Oct. 29, the police said in an e-mailed statement today. “If the device had not been removed from the aircraft, the activation could have occurred over the eastern seaboard of the U.S.”
California Budget Deficit May Swell to $25.4 Billion in Next 19 Months. California, the most populous U.S. state, may face a $25.4 billion budget deficit over the next 19 months, the fourth time in as many years the state has confronted a spending gap, its fiscal analyst said. The deficit includes $6.1 billion in the current fiscal year, which ends June 30, and about $19 billion the next year, according to a report released today by the nonpartisan Legislative Analyst’s Office. Governor-elect Jerry Brown, who will be sworn in Jan. 3, must propose a plan to erase the deficit by Jan. 10. The report warned against “patching over” shortfalls with temporary fixes. “Unless plans are put in place to begin tackling the ongoing budget problem, it will continue to be difficult for the state to address fundamental public-sector goals -- such as rebuilding aging infrastructure, addressing massive retirement liabilities, maintaining service levels of high-priority government programs and improving the state’s tax system,” the report said.
Oil Contango Poised to Diminish as Cushing Storage Grows: Energy Markets. The longest period of contango in the U.S. oil market may end as storage capacity expands by more than a quarter at Cushing, Oklahoma, the biggest U.S. crude- trading hub. Companies have announced plans to build about 14 million barrels of tanks by the end of 2011. That would boost capacity as much as 27 percent, based on an estimated 51 million to 52 million of existing storage according to Bob Levin, a managing director at CME Group, the owner of Nymex. The additional storage “limits the opportunity for contango,” said Stephen Schork, the president of the Schork Group Inc. in Villanova, Pennsylvania. “If you do have that ability now to put those barrels into storage, you will see a return back to fundamentals.”
China Has to Restrict Rare-Earth Exports to Protect Resources, Group Says. China, which produces more than 90 percent of the world’s rare earth metals, needs to control exports of the minerals to protect natural resources and cut pollution, said the Chinese Society of Rare Earths. Rare-earth prices have surged as much as sevenfold as China in July reduced its second-half export quota by 72 percent to ensure domestic supply of the mineral used in laptops, missile- guidance systems and hybrid cars.
China Said to Have Raised Reserve Ratio Twice for Some Banks. China raised reserve requirements on some banks twice yesterday, taking the total increase to 100 basis points for a few lenders, said two people with direct knowledge of the situation. China ordered some lenders, including Bank of Communications Co., to increase their reserve ratios by 50 basis points from Nov. 15, a person with direct knowledge of the matter said yesterday. This was on top of another half percentage point increase announced late yesterday by the Chinese central bank, effective Nov. 16., the people said today.
Wall Street Journal:
CME(CME) Raises the Cost of Trading.Commodities exchanges are raising the cost of trading everything from soybeans to silver, amid the wave of speculative money that has flooded into the markets, increased volatility and sent prices new highs. On Wednesday, CME Group increased "margin requirements," or the minimum deposit a trader is required to pony up, for trading soybeans futures contracts. This follows a similar move by the Chicago exchange late Tuesday on silver futures, triggering a broad selloff among all precious metals.
Blackstone(BX), Goldman(GS) Submit Withdrawal Notices to Harbinger. Some of the best-known investors in the hedge-fund world are lining up to withdraw money from a firm that once was among the biggest names in the business. Blackstone Group and Goldman Sachs Group Inc. are among investors who have submitted withdrawal notices to Philip Falcone's Harbinger Capital Partners LLC, according to people familiar with the matter.
G-20 Nears Pact but Tensions Still Fester. World leaders gathered for the Group of 20 summit neared an agreement that appears to paper over many of the differences that have roiled discussions and financial markets in recent days, but one that's unlikely to end tension over currency and trade policies.
Deficit Panel's Leaders Push Cuts. The leaders of a White House commission laid out a sweeping proposal to cut the federal budget deficit by hundreds of billions a year by targeting sacrosanct areas of U.S. tax and spending policy, such as Social Security benefits, middle-class tax breaks and defense spending.
'QE2' in the Dock: Some Yields Are Going Up. The Fed's latest "quantitative easing" program is designed to bring down interest rates, but some are moving up instead. Rates, which rise as the price falls, have risen lately as investors avoid U.S. government debt—including a new 30-year bond auctioned on Wednesday. That has generated market anxiety that the Federal Reserve has lost control of rates and inflation expectations.
Iraq's Oil Patch Opens the Spigot. This dusty and ragged city in southern Iraq was notorious a couple years back for its vicious militia warfare and rampant smuggling. Today Basra has a very different rep: one of the world's newest oil boom towns. Some of the world's largest energy companies are ramping up drilling in Iraq. The drilling frenzy has triggered an investment and building boom in Basra itself.
Labor Board's Recent Decisions Tilt in Favor of Unions. Unions are increasingly looking to the National Labor Relations Board to seek favorable workplace rulings, and the agency is showing a willingness to reopen matters previously decided in favor of employers.
Health-Care Start-Ups Face Wobbly Investment Climate. Investing in Silicon Valley health-care start-ups appears to have cooled, at least temporarily. In the third quarter, venture-capital investment into closely held health-care-related companies in the Bay Area totaled $421.5 million, down 35% from $650.6 million in the same period a year earlier, according to research firm VentureSource.
CNBC:
Cisco(CSCO) Profit Tops Forecast, But Shares Slide Lower. Cisco Systems reported improved earnings, but the recovery was mostly as expected, and the company's shares retreated 4 percent as investors cashed in on their recent gains. The computer networking giant said it earned $2.4 billion, or 42 cents a share in its fiscal first quarter, excluding one-time items, against a profit of 36 cents a share during the same period last year. Sales rose to $10.75 billion in the most recent quarter, up from $9.021 billion last year. Analysts who follow Cisco predicted on average that the company would report a profit of 40 cents a share on sales of $10.74 billion.
China's SAIC Near GM IPO Stake Buy: Report. General Motors is in the final stage of talks to sell equity to long-time Chinese partner SAIC Motor in conjunction with its landmark initial public offering, two people familiar with the matter said. The two government-funded automakers are currently finalizing how much of a stake SAICwould buy in the top U.S. automaker after discussions involving technology sharing and SAIC's ambitions to move beyond the China market, the people said.
Obama's Asian Outreach Under Scrutiny at G20. U.S. President Barack Obama will hold delicate meetings with China and South Korea on Thursday as he seeks to advance key security issues while navigating tough talks on currencies and trade.
NY Times Editor on the 'Beauty' of Readers' Ignorance. The New York Times cultivates an image as the preferred read of the intellectual elite, but at least one of the paper’s higher-ups seems to think its customers aren’t all that bright.
Rasmussen Reports:
Most Voters Favor Investigation of Health Care Law's Potential Impact. A new Rasmussen Reports national telephone survey finds that 55% of Likely U.S. Voters favor having House Republicans investigate the projected costs and implications of the health care law passed by Congress earlier in the year. Thirty-two percent (32%) oppose such an investigation.
Politico:
Nancy Pelosi Faces New Resistance from Democrats. Nancy Pelosi is struggling to stand her ground as the effects of last week's Democratic debacle shift the political earth beneath her feet. Pelosi announced Friday that she’s running for minority leader in the new Congress, and her election still seems on track. But a movement by conservative Blue Dogs to block her ascent has picked up support from some liberals and even a handful of longtime Pelosi allies, who question whether she is the best person to lead the battered party in the House.
Reuters:
South Korea Central Bank Report: US Fed Move Poses May Risks. The U.S. Federal Reserve's latest move to buy more bonds to stimulate the U.S. economy poses many risks, not only for emerging-market economies but for U.S. policy as well, South Korea's central bank said in a report. In addition to swamping emerging markets with dollars, the Fed's move will also fan commodities prices, making it difficult for the Fed itself to implement an exit from stimulus later, it said in a report posted on its website late on Wednesday. If the Fed has to start selling off government bonds later to absorb liquidity or raise the benchmark interest rate, bond prices will fall sharply and incur huge losses for the Federal Reserve, which has greatly expanded bond holdings of late. If it delayed policy normalisation because of this fear, it would cause inflation to flare up, the Bank of Korea said.
Private Equity Deals Up for 5th Straight Quarter. The number of investments made by private equity firms rose in the third quarter, marking the fifth straight quarter of gains, with Europe marking the largest increase, according to data from Thomson Reuters released on Wednesday.
U.S. Pursuing Dollar Weakening Policy - Alan Greenspan. The United States is pursuing a policy of weakening its currency, driving up exchange rates in the rest of the world, former Federal Reserve Chairman Alan Greenspan warned on Wednesday. In a guest column for the Financial Times, Greenspan also said that as China holds down the renminbi, the upward pressure on other currencies risks a return to widespread protectionism. "America is also pursuing a policy of currency weakening. The suppression of the renminbi and the recent weakening of the dollar are, of necessity, producing firming exchange rates in the rest of the world," Greenspan wrote ahead of the Group of 20 summit in Seoul on Thursday. "Something has to give in this arena of zero-consolidated current account balances." Greenspan said while the global trading system can tolerate a modest amount of protection, "the flaws in the global trading system are large and worrisome."
'Moderate' Evidence Backs Dendreon(DNDN) Vaccine - US CMS.All of the available data for Dendreon Corp's controversial Provenge prostate cancer vaccine shows 'moderate' support for its use, according to a government analysis by the nation's Medicare agency. The Centers for Medicare and Medicaid Services (CMS), which meets with outside advisers next Wednesday to discuss paying for the vaccine, analyzed all the available evidence for the therapy that has had drawn scrutiny for its large price tag amid praise from cancer advocates. Shares of Dendreon, which closed at $34.83, rose 5.4 percent to $36.70 in after-hours trading.
'Major' Human Smuggling Cell Busted in Arizona; 9 Arrested, Accused of Smuggling Thousands. Authorities have dismantled a major cell of a human smuggling ring that may be responsible for the transportation of thousands of illegal immigrants from the U.S.-Mexico border to Phoenix and other parts of the country, investigators said Wednesday. Nine people were arrested Wednesday after a yearlong investigation. They have not yet been charged but are accused of picking up illegal immigrants after they crossed the border by foot, and taking them to what are known as drop houses in Phoenix before they were distributed to other parts of the country.
People's Daily:
China should tighten money supply this year and in 2011 to stabilize economic growth and ease inflation pressures, Chen Jiagui, a researcher with the Chinese Academy of Social Sciences, wrote. The nation should maintain a proactive fiscal policy, Chen wrote.
Evening Recommendations Citigroup:
Reiterated Buy on (STWD), boosted target to $24.
Downgraded (GWW) to Sell, target $118.
Reiterated Buy on (CBI), target $36.
Reiterated Buy on (KSS), raised target to $72.
Reiterated Buy on (M), lowered target to $33.
Reiterated Buy on (CHKM), target $31.
Night Trading
Asian equity indices are -.75% to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 101.0 -2.0 basis points.
Asia Pacific Sovereign CDS Index 97.0 +1.0 basis point.
The Fed's Lockhart speaking, BofA Merrill Global Energy Conference, BMO Capital Digital Entertainment Conference, CSFB Healthcare Conference, (OC) analyst meeting and the (AMP) financial community meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial 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 92.0 bps +6.37%
European Financial Sector CDS Index 113.50 bps +7.10%
Western Europe Sovereign Debt CDS Index 172.50 bps +.58%
Emerging Market CDS Index 203.72 bps +1.73%
2-Year Swap Spread 22.0 +2 bps
TED Spread 16.0 -1 bp
Economic Gauges:
3-Month T-Bill Yield .12% +1 bp
Yield Curve 223.0 +1 bp
China Import Iron Ore Spot $160.30/Metric Tonne +1.26%
Citi US Economic Surprise Index +36.10 +3.5 points
10-Year TIPS Spread 2.11% -2 bps
Overseas Futures:
Nikkei Futures: Indicating +45 open in Japan
DAX Futures: Indicating +39 open in Germany
Portfolio:
Higher: On gains in my Tech and Biotech long positions
Disclosed Trades: Covered all of my (IWM), (QQQQ) hedges and some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs despite recent sharp equity gains, losses in overseas equities today and rising euro sovereign debt angst. On the positive side, REIT, Restaurant, Road & Rail, Coal, Oil Tanker, Oil Service, Gold, Networking, Wireless, Bank, I-Banking, Hospital, HMO, Insurance and Construction shares are especially strong, rising more than 1.0%. (XLF)/(IYR) have traded well today, especially considering yesterday's losses. Small-Cap and cyclical shares are outperforming. Lumber is rising +1.02%. On the negative side, Gaming, Ag and Utility shares are under pressure, falling more than 1.0%. Copper is down -1.36%. Shanghai copper inventories are rising another +7.74% today and are now at the highest level since early June. The Spain sovereign cds is gaining +4.3% to 276.52 bps, the Ireland sovereign cds is rising +3.47% to 590.99 bps and the Portugal sovereign cds is gaining +2.0% to 466.40 bps. Moreover, key global cds indices continue to surge higher, which is a large negative. Stocks remain very resilient. However, these cds indices must reverse course soon to keep the recent global equity uptrend in tact. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, diminishing financial sector pessimism and technical buying.
