U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as more economic optimism and buyout speculation offsets profit-taking, rising sovereign debt angst and China inflation worries. My intermediate-term trading indicators are giving mostly bullish signals and the Portfolio is 75% net long heading into the week.
Sunday, January 09, 2011
Friday, January 07, 2011
Weekly Scoreboard*
Indices
- S&P 500 1,271.50 +1.10%
- DJIA 11,674.70 +.84%
- NASDAQ 2,703.17 +1.90%
- Russell 2000 787.83 +.53%
- Wilshire 5000 13,269.90 +1.05%
- Russell 1000 Growth 580.64 +1.04%
- Russell 1000 Value 646.20 +1.09%
- Morgan Stanley Consumer 756.86 +.43%
- Morgan Stanley Cyclical 1,069.46 +2.57%
- Morgan Stanley Technology 680.82 +2.50%
- Transports 5,178.45 +1.40%
- Utilities 407.72 +.67%
- MSCI Emerging Markets 47.42 -.42%
- Lyxor L/S Equity Long Bias Index 1,036.81 +.88%
- Lyxor L/S Equity Variable Bias Index 873.66 +.42%
- Lyxor L/S Equity Short Bias Index 691.47 -.60%
- NYSE Cumulative A/D Line +111,971 +.81%
- Bloomberg New Highs-Lows Index +378 +56
- Bloomberg Crude Oil % Bulls 26.19 -54.89%
- CFTC Oil Net Speculative Position +149,466 -8.05%
- CFTC Oil Total Open Interest 1,471,226
- Total Put/Call .91 -7.14%
- OEX Put/Call 1.16 -34.46%
- ISE Sentiment 94.0 -6.93%
- NYSE Arms 1.15 +7.47%
- Volatility(VIX) 17.14 -3.44%
- G7 Currency Volatility (VXY) 12.25 -2.78%
- Smart Money Flow Index 9,916.16 +.90%
- Money Mkt Mutual Fund Assets $2.798 Trillion -.40%
- AAII % Bulls 55.88 +8.27%
- AAII % Bears 18.25 -8.98%
- CRB Index 323.94 -2.66%
- Crude Oil 88.03 -3.28%
- Reformulated Gasoline 241.31 -.21%
- Natural Gas 4.42 +.55%
- Heating Oil 248.63 -2.02%
- Gold 1,368.90 -3.71%
- Bloomberg Base Metals 256.85 -1.71%
- Copper 428.25 -3.47%
- US No. 1 Heavy Melt Scrap Steel 373.67 USD/Ton +9.0%
- China Hot Rolled Domestic Steel Sheet 4,669 Yuan/Ton +2.30%
- UBS-Bloomberg Agriculture 1,609.26 -2.26%
- ECRI Weekly Leading Economic Index 128.90 -.08%
- Citi US Economic Surprise Index +35.10 +20.5 points
- Fed Fund Futures imply 72.0% chance of no change, 28.0% chance of 25 basis point cut on 1/26
- US Dollar Index 81.13 +2.61%
- Yield Curve 273.0 +3 basis points
- 10-Year US Treasury Yield 3.33% +4 basis points
- Federal Reserve's Balance Sheet $2.418 Trillion +.61%
- U.S. Sovereign Debt Credit Default Swap 40.46 -5.10%
- California Municipal Debt Credit Default Swap 300.50 +.43%
- Western Europe Sovereign Debt Credit Default Swap Index 209.83 +2.44%
- 10-Year TIPS Spread 2.35% +7 basis points
- TED Spread 17.0 -1 basis point
- N. America Investment Grade Credit Default Swap Index 89.19 +4.70%
- Euro Financial Sector Credit Default Swap Index 174.28 +19.59%
- Emerging Markets Credit Default Swap Index 205.38 +2.30%
- CMBS Super Senior AAA 10-Year Treasury Spread 188.0 -19 basis points
- M1 Money Supply $1.860 Trillion +2.01%
- Business Loans 619.90 +1.09%
- 4-Week Moving Average of Jobless Claims 410,800 -.80%
- Continuing Claims Unemployment Rate 3.3% unch.
- Average 30-Year Mortgage Rate 4.77% -9 basis points
- Weekly Mortgage Applications 472.10 +2.34%
- ABC Consumer Confidence -45 -1 point
- Weekly Retail Sales +3.6% unch.
- Nationwide Gas $3.08/gallon +.01/gallon
- U.S. Heating Demand Next 7 Days 9.0% above normal
- Baltic Dry Index 1,519 -14.33%
- Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 -20.0%
- Rail Freight Carloads 166,894 -5.84%
- Iraqi 2028 Government Bonds 93.0 +1.25%
- Large-Cap Value +1.09%
- Small-Cap +.36%
- Oil Tankers +6.38%
- Homebuilders +5.79%
- HMOs +5.75%
- Airlines +5.11%
- Gaming +4.92%
- Medical Equipment -1.31%
- Semis -1.50%
- Retail -1.55%
- Construction -1.76%
- Gold -6.28%
One-Week High-Volume Losers
*5-Day Change
Stocks Slightly Lower into Final Hour on Disappointing Jobs Report, Financial Sector Pessimism, Rising Euro Debt Angst, Profit-Taking
Broad Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- Volume: Around Average
- Market Leading Stocks: Performing In Line
- VIX 17.40 unch.
- ISE Sentiment Index 88.0 -43.59%
- Total Put/Call .93 +25.68%
- NYSE Arms 1.34 +.13%
- North American Investment Grade CDS Index 89.19 +4.56%
- European Financial Sector CDS Index 182.48 bps +6.52%
- Western Europe Sovereign Debt CDS Index 209.83 bps +2.78%
- Emerging Market CDS Index 205.51 +1.91%
- 2-Year Swap Spread 24.0 -1 bp
- TED Spread 17.0 +1 bp
- 3-Month T-Bill Yield .13% -1 bp
- Yield Curve 273.0 -1 bp
- China Import Iron Ore Spot $172.60/Metric Tonne +.76%
- Citi US Economic Surprise Index +35.10 +16.2 points
- 10-Year TIPS Spread 2.35% -5 bps
- Nikkei Futures: Indicating -31 open in Japan
- DAX Futures: Indicating +20 open in Germany
- Slightly Higher: On gains in my Medical, Biotech long positions and ETF hedges
- Disclosed Trades: Added to my (IWM)/(QQQQ) hedges and then covered them
- Market Exposure: 75% Net Long
Today's Headlines
Bloomberg:
- Portuguese Bonds Lead Peripheral Euro-Area Decline Amid Looming Auctions. Portuguese government bonds led declines by securities from the euro-region’s most indebted nations amid concern demand at auctions next week may flag. Spanish 10-year bonds fell, driving the extra yield investors demand to hold the securities instead of similar- maturity German bunds to the highest in more than a month. “Auctions next week will be the first primary market test,” said Kornelius Purps, a fixed-income strategist at UniCredit SpA in Munich. “There is no fresh buyer interest. This is weighing on the periphery.” The yield on Portuguese 10-year bonds rose 16 basis points, after a 27 basis-point increase yesterday, to 7.34 percent at 4:24 p.m. in London. The 4.8 percent security maturing in June 2020 fell 0.955, or 9.55 euros per 1,000-euro ($1,295) face amount, to 83.10. The yield is up 33 basis points since Dec. 30. The cost of insuring against default on European government debt, measured by the Markit iTraxx SovX Western Europe Index, increased four basis points to a record 217. Contracts on Portugal rose 10 basis points to 535, the highest level since Nov. 30, according to CMA. Spain increased 4.5 basis points to 353, Italy climbed 9 to 251, and Belgium reached a record 249. Spanish 10-year yields climbed three basis points to 5.52 percent. The yield premium to bunds increased to 263 basis points, after reaching 264 basis points, the most since Dec. 1. Italian 10-year bond yields rose four basis point to 4.82 percent, with Irish yields increasing six basis points to 9.25 percent. Belgian bonds fell for a third day, sending the 10-year yield to a more than 18-month high, as politicians failed to restart talks to form a government almost seven months after inconclusive federal elections. The yield was up six basis points at 4.15 percent, after reaching 4.18 percent, the highest since June 2009.
- Banks Lose Pivotal Massachusetts Foreclosure Case. US Bancorp and Wells Fargo & Co. lost a foreclosure case in Massachusetts’s highest court that will guide lower courts in that state and may influence others in the clash between bank practices and state real estate law. The ruling drove down bank stocks.The state Supreme Judicial Court today upheld a judge’s decision saying two foreclosures were invalid because the banks didn’t prove they owned the mortgages, which he said were improperly transferred into two mortgage-backed trusts. “We agree with the judge that the plaintiffs, who were not the original mortgagees, failed to make the required showing that they were the holders of the mortgages at the time of foreclosure,” Justice Ralph D. Gants wrote. Wells Fargo, the fourth-largest U.S. lender by assets, dropped $1.10, or 3.4 percent, to $31.05 at 11:41 a.m. in New York Stock Exchange composite trading. US Bancorp declined 28 cents, or 1.1 percent, to $26.01. The 24-company KBW Bank Index fell as much as 2.2 percent after the decision was handed down.
- U.S. Adds 103,000 Jobs in December, Unemployment at 9.4%. Employers in the U.S. added fewer jobs than forecast in December, confirming Federal Reserve Chairman Ben S. Bernanke’s view that it will take years for the labor market to heal. Payrolls increased 103,000, compared with the median forecast of 150,000 in a Bloomberg News survey, Labor Department figures showed today in Washington. Employment the prior two months rose more than initially estimated. The jobless rate fell to 9.4 percent, partly reflecting a shrinking workforce. For all of 2010 the jobless rate averaged 9.6 percent, the highest since 1983 and up from 9.3 percent a year earlier.
- S&P GSCI Says Commodity Assets Against Index Rose as High as $100 Billion. Assets invested against the S&P GSCI index of commodities rose to between $90 billion and $100 billion as of Dec. 31, said Michael McGlone, senior director of commodities at S&P Indices. Assets are up from between $75 billion and $80 billion estimated in August. The S&P GSCI Spot Index rose 20 percent last year, after surging 50 percent in 2009.
- Crude Oil May Decline Next Week as Hedge Fund Buying Drops, Survey Shows. Oil may fall for a third consecutive week on speculation buying by hedge funds will decline after bullish bets on crude oil rose to the highest level in more than four years in December, a Bloomberg News survey showed. Twenty-two of 42 analysts, or 52 percent, forecast crude oil will decline through Jan. 14. Eleven respondents, or 26 percent, predicted prices will rise and nine estimated there would be little change. Last week, 58 percent of analysts forecast the market would decrease. Hedge funds increased net-long positions, or wagers on rising prices, by 4.6 percent in the seven days ended Dec. 28, according to the Commodity Futures Trading Commission’s weekly Commitments of Traders report. It was the biggest total in records going back to June 2006. “Money managers came into the year with record net-long positions, so we may have just for the time being run out of buying,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “It was a crowded trade. Everyone was already very heavily long.”
- California's Bell Slashes $800,000 Manager Pay and Still Sees a Deficit. Bell, California, the Los Angeles suburb that paid its city manager almost $800,000 a year, will have a budget shortfall of $2.16 million even with slashes in pay, according to a county audit. The city of 38,800, about 10 miles (16 kilometers) south of Los Angeles, faces a shortfall equivalent to 14.5 percent of its general-fund expenditures, Los Angeles County Auditor-Controller Wendy Watanabe said in a report yesterday.
- Sovereign Debt Unsafe, Default Concern Spreads to U.S., Japan, Buiter Says. Fears of a sovereign default are “manifest” in Europe and will soon spread to Japan and the U.S. as governments struggle to control deficits, according to Citigroup Inc. economists led by former Bank of England policy maker Willem Buiter. “Despite the recent drama, we believe we have only seen the opening and second act, with the rest of the plot still evolving,” London-based Buiter and colleagues wrote in a research note published today. “There is absolutely no safe” sovereign. “The U.S. and Japan likely cannot continue to ignore the issues of fiscal sustainability,” said the Citigroup economists, who added that it’s “only a matter of time” before the U.S. government can only fund itself through debt issuance at “significantly higher interest rates.”
- Trichet Says ECB No Substitute for Government Irresponsibility. European Central Bank President Jean- Claude Trichet warned governments not to rely on the ECB to get Europe out of its debt crisis and urged them to step up efforts to tighten fiscal rules. “Monetary-policy responsibility cannot substitute for government irresponsibility,” Trichet told German lawmakers today in Wildbad Kreuth, Bavaria, according to a text provided by the ECB. “Europe cannot afford to rest halfway, we need to be more ambitious. The proposals that we have seen in Brussels do not go far enough in the ECB’s view.”
- Germany's Retail Sales Unexpectedly Declined in November. Retail sales in Germany, Europe’s largest economy, unexpectedly declined in November as the region’s debt crisis clouded the growth outlook. Sales, adjusted for inflation and seasonal swings, dropped 2.4 percent from October, when they rose 0.1 percent, the Federal Statistics Office in Wiesbaden said today. Economists had forecast a 1 percent gain, the median of 12 estimates in a Bloomberg News survey shows.
- Brazil Inflation Rose at Fastest Pace Since 2004. Prices rose 5.91 percent last year, the fastest annual pace since a 7.6 percent jump in 2004, the national statistics agency said.
Wall Street Journal:
- Greenspan Warns of Risks From U.S. Debt. Former Fed Chairman Alan Greenspan said the U.S. could face a bond-market crisis if politicians don't act soon to start cutting the nation's debt. "I think that the type of budget agreement that was put together by Alan Simpson and Erskine Bowles is the type of budget that will be passed by Congress," Mr. Greenspan said. "The only question is, will it be before or after the bond-market crisis." The former head of the U.S. Federal Reserve was referring to the co-chairmen of the National Commission on Fiscal Responsibility and Reform, who last month won limited support for a sweeping overhaul of U.S. tax and spending policies that would cut $4 trillion in debt. Mr. Greenspan said the risk of a bond-market crisis is so great that he favors raising taxes immediately. "The probability that we will go through the next two or three years with no bond-market problems, no inflation problems, is probably better than 50-50," he said. "But not much."
- Europe Senior Bank Debt Insurance Cost Hits 7-Month High. The cost of insuring the senior debt of a basket of 25 European banks and insurers using credit default swaps rose Friday to its highest level since the summer after the European Commission proposed a region-wide system for dealing with bank failures that would see bond holders share the burden of bank bailouts. The iTraxx Europe Senior Financials index rose above 200 basis points for the first time since June in early trading, according to index owner Markit, and after recovering mid-morning, moved back above 200 basis points Friday afternoon. It has now risen more than 30 basis points since the beginning of the year. "The undercurrent definitely still feels bearish," said a broker. Credit spreads on European senior bank bonds were also wider Friday, although the moves varied from bond to bond. The Senior Financials index moved up 16.5 basis points Thursday as the commission, the European Union's executive arm, published its proposals, inviting public comment until March 3.
- Illinois House Adjourns, May Reconvene Sunday on Tax-Increase Plan.
- PIGS Debt Riskier Than Iraq, CDS Prices Show. Greece has become the world's riskiest borrower in the fourth quarter of 2010, surpassing Venezuela, while Spain, Portugal and Ireland were riskier than Iraq, according to data compiled by CMA, a provider of data on pricing of Credit Default Swaps (CDS).
- FedEx(FDX), UPS(UPS) Probed by Justice Over Third-Party Advisers. The Justice Department's antitrust division is conducting some sort of investigation into UPS and FedEx regarding complaints that they are blocking customers from using third-party shipping consultants and negotiators, CNBC has learned.
- Food Stamp Usage Hits New High of 43.2 Million. (graph)
- NSA Underemployment (U-6) Jumps to 16.6%, Highest Since July, And Deteriorating Consistently Since Start of QE2. (graph)
- MBIA(MBI) Fights Banks for Its Life. MBIA, an insurance company whose very existence is imperiled because it underestimated the risks involved in mortgage lending, says the banks owe it billions because they lied about the mortgages backing securities that MBIA insured. The insurer’s financial statements show it is solvent in large part because that money will be coming in.
- Buckle Up for Round 2. The health care reform law was signed 10 months ago, and what’s striking now is how vulnerable it looks. Several threats have emerged — some of them scarcely discussed before passage — that together or alone could seriously endanger the new system. These include:
- Obama's New Chief of Staff Sought to Loosen Post-Enron Corporate Reforms. William M. Daley, President Barack Obama's new chief of staff, is a major Wall Street player who sought to loosen corporate reform laws and protect big accounting firms from investor lawsuits and criminal prosecution.
OrlandoSentinel:
- Doctors' Group Sues USDA Over Vegetarian Alternative to Food Pyramid. In a lawsuit filed in the U.S. District Court for the District of Columbia, the Physicians Committee for Responsible Medicine says the U.S. Department of Agriculture and U.S. Department of Health and Human Services violated federal law by failing to respond to a PCRM petition offering a simple, plant-based alternative — the Power Plate — as an alternative to MyPyramid, the USDA's name for its food pyramid.
- Goldman's(GS) Shady Facebook Deal. Facebook and Goldman Sachs unleashed a tech investing mania this week compared far and wide with the euphoric 1990s dot-com run-up. By arranging a $500 million private investment, at a staggering $50 billion valuation, Goldman at once delayed a Facebook public offering (now expected in 2012), prompted a likely LinkedIn IPO, and thrilled its clients, who clamored for a piece of Mark Zuckerberg's behemoth. But for all the nostalgia for pre-IPO "friends and family" stock in Pets.com, the dot-com era comparisons are off base. Instead, Goldman's Facebook deal mirrors the subprime collateralized debt obligation deals that blew up entire companies, as well as crater-size hole in our economy. In fact, what Goldman just engineered might well be worse.
- Wedbush in Talks to Acquire 4 U.S. Firms. Wedbush Securities, the largest U.S. West Coast brokerage and investment bank, is in takeover talks with four companies that would bolster trade-processing capabilities and expand its presence in more U.S. markets, founder and President Edward Wedbush told Reuters on Thursday.
- China to Raise Rates 2-3 Times in 2011 - Govt Think Tank. China is likely to raise interest rates two to three times in 2011, as policymakers strive to keep a lid on rising prices, a senior economist from a top government think-tank said on Friday. Zhu Baoliang, the chief economist at the State Information Centre, said Chinese policymakers were not too worried about the impact of policy tightening on growth as the economy is on a solid footing. "There is room for further interest rate rises. We think the central bank will raise rates two or three times this year and raise banks' reserve requirements further," he told Reuters. Inflation, which raced to a 28-month high of 5.1 percent in November, will probably stay elevated in coming months before gradually losing steam towards the year-end, Zhu said. The People's Bank of China, which has raised interest rates twice and increased banks' reserve requirements six times since the start of last year, has promised to put the task of fighting inflation at the top of its 2011 agenda. The government's tough measures to clamp down on soaring food prices have achieved some results, but there are worrying signs that price rises are spreading beyond food, Zhu said.
- At the Fed, Hawks Circle, Doves Hold Sway.
- ECRI US Leading Economic Growth Gauge Falls to 2-Week Low.
Financial Times Deutschland:
- German Chancellor Angela Merkel's Bavarian allies will take European Central Bank President Jean-Claude Trichet to task today over the ECB's bond-buying policy. He will probably be criticized over the bank's record of buying debt from euro-region states.
- Poland's unemployment rate rose to 12.3% in December from 11.7% in November.
- Peter Kent's Green Agenda: Clean Up Oil Sands' Dirty Reputation. The oil sands have a new defender: freshly minted Environment Minister Peter Kent, who calls Canada’s tarry resource an “ethical” source of energy that should take priority in the U.S over foreign producers with poor democratic track records.
Bear Radar
Style Underperformer:
- Small-Cap Growth (-1.07%)
- 1) Banks -1.80% 2) Disk Drives -1.56% 3) Hospitals -1.52%
- SMSI, CRZO, MUR, EPAY, TLK, PT, WFC, JPM, TTM, TESO, IGT, XRTX, SCHN, AAWW, ZEUS, ACGY, RECN, PLCE, ATMI, CMCO, LUFK, SCSC, AVAV, HBHC, ROVI, BONT, KALU, INFY, VICR, TKLC, EWK, IHS, GVA and CNQ
- 1) DBA 2) EWJ 3) XLB 4) KBH 5) ATI
- 1) KLAC 2) QGEN 3) CME 4) WFC 5) SSI
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