Thursday, March 10, 2011

Thursday Watch

Posted by Gary .....at 12:43 AM

Evening Headlines
Bloomberg:
  • Qaddafi Strikes Oil Targets as Libya's East-West Split Hardens. Muammar Qaddafi’s forces carried out air and artillery strikes on oil facilities midway along Libya’s coastline as fighting flared across a desert area that is now the east-west dividing line in the nation’s civil war. Warplanes sent from Qaddafi’s home region of Sirte struck the Ras Lanuf refinery, the country’s largest crude processing plant, Al Jazeera television said. The nation’s largest oil terminal, at the port of Sidra, was hit and part was in flames, Al Jazeera said. “With the violence escalating, it was a question of time when oil facilities would be drawn into the fighting,” Samuel Ciszuk, senior Middle East energy analyst at IHS Global Insight in London, said in a phone interview. “To dislodge opposition forces, you need to take these facilities. That would entail hitting some.” The geographic split, with rebels in the east and Qaddafi controlling the west, may result in a partition of the country, said Ryan Crocker, a former U.S. ambassador to Iraq, Pakistan, Syria, Kuwait and Lebanon. “Qaddafi’s going to hang on,” Crocker said in a speech at CERAWeek, an IHS Cambridge Energy Research Associates conference in Houston. “I’m not sure whether he can hold the country, but I am sure that the insurgents aren’t going to take him.” In a recorded speech aired yesterday on state television, Qaddafi called on people in the eastern city of Benghazi, the rebels’ stronghold, to “liberate” themselves from the “traitors” forming the opposition’s ruling council and from Islamist fighters from Afghanistan, Egypt and Algeria who he blamed for the uprising. Libya’s criminal investigations authority is offering a 500,000 dinar ($407,000) reward for any person who arrests the head of the Benghazi-based rebel council, former Justice Minister Moustafa Abdel Jalil, state television reported. More than 400 people have been killed and 2,000 wounded in fighting in eastern Libya since Feb. 17, a member of the insurgents’ provisional health committee told reporters yesterday in Benghazi.
  • NATO Members Weighing Libya No-Fly Zone May Face Resistance. NATO countries are seeking to overcome divisions on a no-fly zone to ground Libyan leader Muammar Qaddafi’s air force and forge a response to the fighting there that stops short of military involvement. The North Atlantic Treaty Organization’s 28 defense ministers are meeting in Brussels today where they’ll discuss military options in response to Qaddafi’s aerial and artillery attacks against rebel-held positions. While countries such as the U.K. and France have urged NATO allies to consider a no-fly zone, with the U.S. less enthusiastic, Germany and other nations have expressed concern about the consequences. “If you support this as an action plan, it basically engages NATO members militarily in Libya,” Josef Janning, the director of studies at the European Policy Centre in Brussels, said in an interview. A no-fly zone “requires that an air defense must be neutralized, requires that you actually physically prevent the Libyan military from using its airbases.”
  • Cattle Rally to Record as Export Demand Increases, Boosting Wal-Mart(WMT) Costs. Cattle futures jumped to a record in Chicago as rising demand for U.S. beef erodes supplies of animals for slaughterhouses and boosts meat costs for food retailers, including Wal-Mart Stores Inc. The U.S. cattle herd is the smallest since 1958 as beef exports surged 19 percent in 2010 to about 2.3 billion pounds (1.04 million metric tons), according to the U.S. Department of Agriculture. Cattle prices have jumped 27 percent in the past year, fueled by a global economic recovery that is boosting meat demand in emerging economies, including China.
  • The U.S. government is concerned that Chinese companies are selling Iran sensitive technology that may be used to develop a nuclear weapons capability, Robert Einhorn, the State Department's special adviser for nonproliferation and arms control, said today. Einhorn's comments are the latest reflection of unease among U.S. officials and proliferation experts that China remains a gap in enforcing United Nations sanctions on Iran, which China supported last year.
  • EU Stress Tests on Banks 'Urgent,' IMF Economist Blanchard Says: Tom Keene. Stress tests on European banks are “most definitely” needed, the International Monetary Fund’s chief economist said. “We need to understand exactly the interaction between sovereign risks and financial risks,” Olivier Blanchard said in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene today. “We need to understand the balance sheets of the banks,” he said, adding it was “very urgent." Asked about rising yields on Greek bonds and bills, Blanchard said ‘it’s very clear Greece has a long way to go.”“We know they cannot afford to pay 16 percent,” he said of the cost of Greece’s two-year debt. “That’s why we’re providing financing.” Asked about rising yields on Greek bonds and bills, Blanchard said ‘it’s very clear Greece has a long way to go.” Blanchard said that “in a number of countries,” especially in emerging markets, there are signs that inflation is picking up. “Once you’ve chosen an inflation target, it’s important for you in terms of credibility to actually try to achieve it,” Blanchard said when asked about central bankers’ recent concerns about inflation.
  • Japan GDP Shrank 1.3% Last Quarter, More Than Previous Estimate. Japan’s economy contracted more than the government initially estimated in the fourth quarter because of a downward revision to capital investment and consumer spending. Gross domestic product shrank at an annualized 1.3 percent rate in the three months ended Dec. 31, more than the 1.1 percent contraction reported last month, the Cabinet Office said today in Tokyo.
  • Bank of Korea Raises Rate to 3% as Inflation Exceeds Target. The Bank of Korea raised interest rates for the second time this year after inflation exceeded its targeted ceiling for two consecutive months. Governor Kim Choong Soo boosted the benchmark seven-day repurchase rate to 3 percent from 2.75 percent, the central bank said in a statement in Seoul today. Inflation has accelerated since rates were increased in January, with consumer prices reaching a two-year high and Finance Minister Yoon Jeung Hyun warning this week that the economy would be “seriously” affected by elevated price expectations. Consumer prices climbed 4.5 percent in February from a year earlier, breaching the central bank’s target of average inflation between 2 percent to 4 percent through 2012. Producer prices climbed 6.6 percent in February from a year earlier, the fastest pace in 27 months, the central bank said earlier today, fanned by oil prices approaching a peak set in 2008.
  • Copper Imports by China Slump to Two-Year Low on Ample Supplies, Prices. Copper imports by China, the largest consumer, tumbled 35 percent in February to the lowest in more than two years as ample domestic supplies weighed down prices, making shipments unprofitable. Arrivals of copper and products dropped to 235,469 metric tons from 364,240 tons in January, according to data on the General Administration of Customs website. That was the lowest level since January 2009, according to Bloomberg data.
  • Americans in Poll Show Scant Confidence as Plurality See Decline. Only 1 American in 7 has faith a lasting economic recovery has taken hold and a plurality say they are personally worse off than they were two years ago. Almost half of the respondents in a Bloomberg National Poll conducted March 4-7 believe the U.S. is in a “fragile” rebound and could fall back into recession. More than a third of the country believes the U.S. never emerged from recession. Sixty-three percent of Americans say the nation is on the wrong track, compared with 66 percent who said so in December, which was the lowest in the national mood in the one and a half years the Bloomberg poll has been conducted.
  • Valero Energy(VLO) is Said to Buy Chevron's U.K. Refinery for About $2 Billion.
Wall Street Journal:
  • Libya Regime Pushes Back. Forces loyal to Col. Moammar Gadhafi seized the central square of a rebel-held city west of the capital and stalled rebel forces in the east, as Libyan officials began a campaign to block international measures against the government. As the U.S., the European Union and other governments looked into options for intervention, including imposing a no-fly zone over Libya as well wider economic sanctions, a delegation of Col. Gadhafi's government headed to Europe carrying messages for North Atlantic Treaty Organization and EU ministers scheduled to hold meetings in Brussels on Thursday, European officials and diplomats said.
  • Clashes Kill 13 as Old Woes Beset New Egypt. Clashes between Coptic Christians and Muslims have killed more than a dozen people in recent days in Egypt, heightening a sense that the country's postrevolutionary euphoria is yielding to enduring problems including sectarian violence, poverty and misogyny. Coptic Christians angry at the burning of a church clashed late Tuesday with thousands of Muslims in a largely Coptic Christian neighborhood near Egypt's capital. At least 13 died and more than 100 wounded in a four-hour clash, said witnesses and the state news agency. The fighting between different religious groups came just hours after several hundred men roughed up female demonstrators who had gathered in Cairo's Tahrir Square to mark International Women's Day and demand expanded rights and opportunities. In a separate tussle on Tahrir Square, the nerve center of Egypt's recent revolt, scores of Egyptian troops and men armed with sticks moved Wednesday night into the square and forced out several hundred protesters who had camped there for the past few days. Dozens of people were hurt, witnesses said.
  • GOP Ends Union Stalemate. Republican senators in Wisconsin Wednesday night maneuvered around Democrats to pass legislation stripping public employees' unions of collective-bargaining rights, setting the stage for other states to pursue similar steps in one of the broadest challenges to organized labor in decades. A vote on Republican Gov. Scott Walker's "budget-repair" bill had been stymied since Feb. 17 when 14 Democratic senators left the state, kicking off a rancorous, three-week political drama. Without the Democrats, the senate lacked a quorum to vote on certain fiscal items in the bill. On Wednesday night, Republican senators convened on short notice and removed appropriations items from the bill to allow a vote on the remaining issues—including curbs on the collective-bargaining rights of public-employee unions. The vote to pass the amended bill was 18-1, with no Democratic senators present.
  • Why I'm Fighting in Wisconsin by Governor Scott Walker.
  • House Panel Votes to End Obama Foreclosure Program. House Republicans moved Wednesday to end the Obama administration's main effort to assist troubled homeowners, with a key panel voting to terminate the program. The attempt to shut down the administration's flagship foreclosure-prevention effort, the Home Affordable Modification Program, or HAMP, is likely to pass the Republican-led House in the coming weeks. The Democratic-controlled Senate, however, is unlikely to take up the bill. Republicans argue that the administration's housing programs are costly to taxpayers at a time when severe budgetary belt tightening is needed. They also note that the government has failed to prevent many foreclosures and has in some cases left homeowners worse off. "The government is offering false hope to hundreds of thousands of Americans," said Rep. Patrick McHenry (R., N.C.). "It's a fundamentally flawed program that was destined to fail from the beginning." When President Barack Obama launched the HAMP program two years ago, the administration said it would assist 3 million to 4 million troubled homeowners with reduced monthly mortgage payments. The program has fallen well short of that goal. About 1.5 million modifications have been started so far. But more than half of the homeowners have dropped out. Only about 540,000 were enrolled in permanent loan modifications and were making their payments on time at the end of January. Democrats concede that the program has been a disappointment, but say it should not be ended.
  • Wall Street Employment in January Rose 5.9% From Year Ago.
  • SEC Officials to Make Case for Increased Funding.
  • Proposed Bill Would Put Curbs on Data Gathering. Sens. John McCain and John Kerry are circulating proposed legislation to create an "online privacy bill of rights," according to people familiar with the situation, a sign of bipartisan support for efforts to curb the Internet-tracking industry.
  • Lawyers Make First Pitches to Jurors. Prosecutors Cite 'Greed and Corruption' in Rajaratnam Case; Defense Says Trading Data Were Legal.
Barron's:
  • Nicely Trimmed. Smaller, stronger hedge-fund industry emerged from financial crisis. For more Penta features.Video: Barron's 100 Top Hedge Funds. WHY INVEST IN A HEDGE FUND? To beat the market, obviously. On that score, the winners of our annual Top 100 Hedge Fund ranking came through with flying colors, posting an average annual return of 20.83% over the past three years, compared to a 2.24% return for all hedge funds and a 15.94% loss for the stock market overall. Because many of our Top 100 invest in bonds and engage in short-selling stocks, they don't always benefit as much in an up market. Last year the average fund on our list was up 25.14%, a tad less than the 26.5% gain for the Standard and Poor's 500 Index. But a lot of hedge funds suffered a far worse fate. Since the financial crisis erupted in late 2008, an estimated 2,000 of them have gone out of business, taking their number down to about 9,000.
Bloomberg Businessweek:
  • HCA Holdings(HCA) Raises $3.79 Billion in IPO. HCA Holdings Inc., the hospital chain that went private in 2006, raised $3.79 billion in its initial public offering. HCA, based in Nashville, Tennessee, sold 126.2 million shares at $30 each, the top of the proposed range, according to data compiled by Bloomberg. The underwriters may exercise an overallotment option to buy as many as 18.9 million additional shares within 30 days of the offering, the data show. HCA sold 87.7 million shares, while existing investors sold 38.5 million.
  • El Baradei Says He Intends to Run in Egypt Presidential Election. Egyptian opposition leader Mohamed ElBaradei said he plans to contest the first presidential elections to be held after mass demonstrations ended former President Hosni Mubarak’s three-decade rule. ElBaradei, 68, emerged as the surprise face of an Egyptian opposition that forced Mubarak from office last month after 18 days of mass demonstrations, ending three decades of rule. The protests were inspired by a mass uprising in Tunisia that led to the ouster of President Zine El Abidine Ben Ali. In the early part of the interview with Egypt’s ONTV, the Nobel Prize winner said he wanted to run in the next election, though he refused to repeat the statement and then said he would only do so if the system was fair. As the show came to an end and after being pressed by the interviewer, he said: “I, Mohamed ElBaradei, intend to officially declare my candidacy for presidency through ONTV.”
  • Fed Gives Markets Clues on Exit Path From Unprecedented Easing. The Federal Reserve is trying to let investors know that, even as it pursues an unprecedented expansion of monetary stimulus, it hasn’t forgotten about exiting.
CNBC:
MarketWatch:
  • CCB Chairman: China Has Room to Hike Banks' RRR. China Construction Bank Corp. (0939.HK) Chairman Guo Shuqing said Thursday there is room to raise banks' reserve requirement ratio as long as liquidity remains flush. Guo also said China Construction Bank will definitely issue fewer new loans this year than last year.
Business Insider:
  • The 14 Biggest Billionaire Losers of the Year.
  • The CIA Pension Fund is Going Broke. According to Pensions and Investments magazine, the CIA's pension plan is going bust. Here's the story:
  • Bill Gross: Tax the Wealthy and Corporations a Lot More. "Of course we should" pay higher taxes, Gross says. "Higher income groups have enjoyed an enormous privilege ever since the Reagan tax cuts...and actually ever since Kennedy began the process back in the ‘60s." Gross admits it's difficult to know what constitutes "wealthy" in America or what federal income tax rate serves as a disincentive to those at the top of the food chain. "But I don't think it's 36%," he says. "I think high-income earners would work well into the 50% tax rate. In addition to tax hikes on the wealthy, "let's raise corporate taxes too," the famed bond fund manager says, a view that runs in direct opposition to the current discussions in Washington. Gross goes on to accuse corporations of "holding governments basically hostage" by threatening to move to another state, or country, if taxes go up. "That's faulty logic and should be tested by politicians going forward. "
Zero Hedge:
Forbes:
CNN Money:
  • Senate Panel to Probe Counterfeit Military Parts Problem. The risk of counterfeit electronics being used in military equipment has prompted a congressional investigation, the top senators on the Senate Armed Services Committee announced Wednesday. "The presence of counterfeit electronic parts in the Defense Department's supply chain is a growing problem that government and industry share a common interest in solving," committee Chairman Carl Levin, D-Michigan, and Sen. John McCain, R-Arizona, the ranking member, said in a statement.
  • Is China's Economy Slowing Too Fast? It's starting to look as if everybody's worst fears about China's economy may finally be coming true. China is slowing down. China reported sluggish auto sales figures for February on Wednesday morning. According to the China Association of Automobile Manufacturers, sales of passenger vehicles were up less than 3% from a year ago. One reason for the slowdown is that tax breaks for small cars expired at the end of last year. But the anemic pace of growth may continue. Economists from Barclays Capital noted in a report Wednesday that "with borrowing costs rising and credit availability falling, the fuel for rising automobile demand is running low" throughout Asia. The economists added that weakness could be most pronounced in China and India since their central banks are raising rates to combat inflation. If oil prices remain above $100 a barrel for an extended stretch, that could only make matters worse. There is reason to be worried that China's economy may be cooling even more quickly than people expected. Optical networking equipment maker Finisar (FNSR), which had been one of the hottest stocks this year due in part to hopes for strong growth in China, stunned investors Tuesday evening with a weak outlook for the current quarter. Finisar said in its earnings report that "a slowdown in business in China overall" was a key reason for its tepid forecast. Shares of Finisar plunged nearly 40% Wednesday on the news, dragging down other networking equipment companies with a big presence in China, like JDS Uniphase (JDSU) and Ciena (CIEN). If more Chinese telecoms and tech firms start to rein in spending, that's not good news. And the biggest problem right now is that China can't afford to be lax about inflation risks. That likely will mean more monetary tightening to slow growth further -- even as the Federal Reserve seems intent on keeping rates near zero for the foreseeable future. "Excess liquidity is already feeding property bubbles, commercial and residential, in certain cities," wrote Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, Scotland in a report this week. He noted that China is acting aggressively. There have been eight increases to bank reserve ratio requirements and three interest rate hikes in the past few months. But China probably has only just begun to tighten. "The latest data still suggest that the authorities are behind the curve, and have more to do," Milligan wrote. Even if China's growth slows, the bigger concern would be what might happen if China doesn't go far enough to keep pricing pressures in check. The consequences of China losing the battle with inflation would be far worse than annual growth slowing from 10% to 7%.
Real Clear Politics:
  • Fantasies From Obama & the Environmental Lobby by John Stossel. Anyone who understands basic economics already knows that President Obama's $2.3 billion green-jobs initiative was snake oil. Now, thanks to Kenneth P. Green, we have statistics as well as theory to prove it. In a new article, "The Myth of Green Energy Jobs: The European Experience," the environmental scientist and a resident scholar at the American Enterprise Institute writes, "Green programs in Spain destroyed 2.2 jobs for every green job created, while the capital needed for one green job in Italy could create almost five jobs in the general economy." Ironically, Obama boasts his initiative "will help close the clean-energy gap between America and other nations." But Green says, "(C)ountries are cutting these programs because they realize they aren't sustainable and they are obscenely expensive."
Politico:
  • Issa: Obama Pay Freeze a Farce. Rep. Darrell Issa called President Barack Obama’s pay freeze on the federal workforce a farce, since it doesn’t bar raises for workers who are promoted.
  • 27% Say U.S. Heading in Right Direction. Sixty-eight percent (68%) of voters now say the country is heading down the wrong track, up two points from last week. Only 45% of Democrats feel this way, however, compared to 87% of Republicans and 72% of voters not affiliated with either major political party.
Reuters:
  • FOREX - Euro Drifts Lower as Sovereign Woes Persist.
  • Goldman Sachs'(GS) Sutherland Calls for Ireland Deal Rethink. The chairman of Goldman Sachs' overseas arm called on the European Union on Thursday to review the terms of Ireland's bailout package because they could exacerbate the country's economic troubles.
  • St Gobain Says Closes Retail Business in Shanghai. Saint-Gobain, the world's largest building materials company, said it has closed one of its retail operations in Shanghai. The move comes after U.S. consumer electronics retailer Best Buy Co Inc (BBY) last month shut down its self-branded stores in China and toymaker Mattel Inc's (MAT) closure of its flagship Barbie store in Shanghai. Saint-Gobain will close all seven "La Maison" outlets in Shanghai given dwindling demand for interior settings from individuals, Nicolas Nie, external affairs director at Saint-Gobain China, said. The group, which competes with Owens Illinois (OI) and CRH, manufactures and distributes construction products such as pipes, ceramics and flat glass. Its materials were used to build the Louvre Pyramid in Paris and London's Gherkin tower. Global retailers are eager to tap China's massive consumer market, but getting people in the world's most populous nation to open their wallets is not as easy as it seems.
  • Inflows into US Mutual Funds Halve in Latest Week - ICI.
  • U.S. Clears New Lupus Drug, Blockbuster Sales Seen. The first new treatment for lupus in a half-century won U.S. approval on Wednesday, a milestone for patients with the disabling disease and a potential blockbuster for its tiny biotech maker. Shares of Human Genome(HGSI), a money-losing company founded in 1992 to develop drugs with data from the human genetic map, were halted. The company will split profits with British drug giant GlaxoSmithKline Plc(GSK).
Financial Times:
  • JPMorgan(JPM) Highlights Leverage Anomaly. US bank use of debt to juice up returns in their trading books is almost twice that of the average hedge fund, a report from JPMorgan has estimated. Hedge funds have been steadily reducing their leverage – the amount of borrowed money deployed to boost returns – since 2008, the report found. In contrast, bank leverage has remained sharply elevated.
Telegraph:
  • EU Paralysis Drives Fresh Bond Rout. Political paralysis in Brussels and monetary tightening by the European Central Bank has set off a fresh spasm of the eurozone bond crisis, pushing spreads on Portuguese, Irish and Greek bonds to post-EMU records. Portugal edged closer to the brink yesterday, having to pay almost 6pc to raise two-year debt. The yield on 10-year bonds briefly surged to 7.8pc after the Chinese rating agency Dagong downgraded the country's debt to BBB+. "These levels of interest rates are not sustainable over time," said Carlos Costa Pina, secretary of the Portuguese Treasury, blaming the latest upset on the lack of a coherent EU debt strategy rather any failing by Portugal to deliver on austerity. Mr Costa Pina rebuffed calls by leading economists in Portugal for an EU-IMF bail-out rather than drawing out the agony.
Sky News:
  • Prudential Plc CEO Tidjane Thiam told Sky in an interview that UK taxation is "too high," saying "lower taxation drives growth, drives employment and leads to higher revenues for the government." Thiam said the UK has a "number of strengths" including its geographic location and labor market, and London is the "right location" for the company. "But as these various elements move," Thiam said, "that conclusion may change."
Herald Sun:
  • Soaring Australian House Prices May Spark Mortgage Crisis - Economist Brian Haratsis. The nation could face a sub-prime crisis like the one in the US that sparked the global financial crisis, said Brian Haratsis, chief economist at Macro Plan Australia. He warned that without government intervention on house prices battlers at the bottom end of the market would be worst affected. He is also predicting at least two rate rises this year, pushing home loan interest rates as high as eight per cent for some punters and freezing the market. "Australia is going to be extremely exposed between 2012-15 because people won't be able to afford to buy a house," he said. "A lot of people could wind up with negative equity and we could have a sub-prime issue on our hands." He warns that all parts of the property market could feel the effects if another "Black Swan Event" like a market crash in China occurs. Mr Haratsis has been monitoring the industry for 30 years and believes house prices are inflated by about 20 per cent at the moment.
South China Morning Post:
China Daily:
  • Chinese central bank adviser Li Daokui expects inflation this year to average 5% for the Asian nation, citing an interview.
China Forex:
  • China may face "relatively large" potential risks from mass cross-border capital flows led by the uncertain U.S. economy, Deng Xianhong, deputy director of the State Administration of Foreign Exchange, wrote in a commentary. China should crack down on "hot money" inflows that may impact economic and financial systems, Deng wrote.
Evening Recommendations
Collins Stewart:
  • Rated (ISRG) Buy, target $400.
Night Trading
  • Asian equity indices are -1.50% to -.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 107.50 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 115.50 -1.25 basis points.
  • S&P 500 futures -.59%.
  • NASDAQ 100 futures -.61%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (JW/A)/.71
  • (BKE)/1.00
  • (JTX)/.31
  • (SFD)/.69
  • (ZQK)/-.05
  • (ZUMZ)/.48
  • (NSM)/.24
  • (PLL)/.57
  • (ARO)/.97
  • (ULTA)/.44
Economic Releases
8:30 am EST
  • Initial Jobless Claims for last week are estimated to rise to 376K versus 368K the prior week.
  • Continuing Claims are estimated to fall to 3750K versus 3774K prior.
  • The Trade Deficit for January is estimated to widen to -$41.5B versus -$40.6B in December.
2:00 pm EST
  • The Monthly Budget Deficit for February is estimated to widen to -225.2B versus -220.9B in January..
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Consumer Advisory Council meeting, $13 Billion 30-Year Treasury Bonds Auction, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, Morgan Stanley Utilities Conference, Oppenheimer Internet Infrastructure Conference, RBC Capital Tech/Communications Conference, BofA Merrill Refining Conference, (CEDC) Investor Day, (CYMI) analyst meeting and the (UTX) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and commodity shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.
1 comments

Wednesday, March 09, 2011

Stocks Slightly Lower into Final Hour on Growing Mideast Unrest, Emerging Markets Inflation Worries, More Shorting, Tech Sector Weakness

Posted by Gary .....at 3:40 PM

Broad Market Tone:
  • Advance/Decline Line: Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 20.08 +1.31%
  • ISE Sentiment Index 118.0 -13.87%
  • Total Put/Call .82 -6.82%
  • NYSE Arms 1.07 +16.05%
Credit Investor Angst:
  • North American Investment Grade CDS Index 84.57 +.86%
  • European Financial Sector CDS Index 120.42 +5.60%
  • Western Europe Sovereign Debt CDS Index 176.83 bps +.95%
  • Emerging Market CDS Index 206.87 +1.85%
  • 2-Year Swap Spread 18.0 -2 bps
  • TED Spread 22.0 +2 bps
Economic Gauges:
  • 3-Month T-Bill Yield .09% -1bp
  • Yield Curve 278.0 -5bps
  • China Import Iron Ore Spot $171.60/Metric Tonne -.69%
  • Citi US Economic Surprise Index +88.40 -2.8 points
  • 10-Year TIPS Spread 2.52% -5 bps
Overseas Futures:
  • Nikkei Futures: Indicating -14 open in Japan
  • DAX Futures: Indicating +10 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Tech and Medical longs
  • Disclosed Trades: Added (IWM)/(QQQQ) hedges and added to my (EEM) short
  • Market Exposure: Moved to 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish as the S&P 500 trades slightly lower, despite some positive economic data, lower food/energy prices and falling long-term rates. On the positive side, HMO and Computer Service shares are especially strong, rising 1.0%+. The Saudi sovereign cds is falling -2.43% to 125.68 bps and the Israeli sovereign cds is falling -1.37% to 150.49 bps. Moreover, the US Muni CDS Index is falling -3.05% to 151.97 bps. The UBS-Bloomberg Ag Spot Index is down -1.36% and oil is down -.47%. The 10-year yield is dropping -7 bps to 3.47%. On the negative side, Airline, Wireless, Networking, Disk Drive, Semi, Steel, Ag, Oil Service, Alt Energy and Coal shares are under meaningful pressure, falling more than 1.0%. Cyclicals are relatively weak. Tech is also underperforming again with (SMH) breaking down through its 50-day moving average on volume. Copper is breaking down from a multi-month trading range to the lowest level since Dec. The UK sovereign cds is rising +3.57% to 57.76 bps, the Belgium sovereign cds is gaining +3.41% to 166.50 bps, the Italy sovereign cds is climbing +3.69% to 180.17 and the Spain sovereign cds is surging +5.02% to 252.84 bps. The European Financial Sector CDS Index is trading like it has bottomed, which is a big negative. The avg. US price for a gallon of gas is unch. today at $3.53/gallon. It is up .41/gallon in 20 days. Equity investor complacency regarding the deteriorating situation in the Mideast remains high. Speculation by funds in oil is at very extreme levels and likely caps significant near-term upside in the commodity barring any new developments in the region. Equity leadership quality is lacking again today. However, the bears remain unable to gain any significant traction despite a number of potential downside catalysts. Broad market action has become very whippy and random. I will wait for a clearer picture of market direction before further shifting exposure. I expect US stocks to trade mixed-to-lower into the close from current levels on growing Mideast unrest, emerging markets inflation worries, more shorting, tech/commodity sector weakness and profit-taking.

1 comments

Bear Radar

Posted by Gary .....at 2:06 PM

Style Underperformer:
  • Small-Cap Growth (-.56%)
Sector Underperformers:
  • 1) Semis -4.0% 2) Coal -2.20% 3) Networking -2.12%
Stocks Falling on Unusual Volume:
  • EOC, MFC, AEL, TMX, CPL, OPLK, AFOP, CLF, QCOM, MON, FNSR, TICC, BKCC, WBMD, OCLR, DMND, SXCI, GNTX, JDSU, CAVM, SSYS, PERY, BSFT, XLNX, CASY, WRLD, ALTR, EXFO, SWKS, SAM, O, PVG, PVR, NCS, XSD and OAS
Stocks With Unusual Put Option Activity:
  • 1) FNSR 2) EXC 3) XLNX 4) SOL 5) CX
Stocks With Most Negative News Mentions:
  • 1) MOS 2) CXO 3) VC 4) WRLD 5) UNFI
Charts:
0 comments

Bull Radar

Posted by Gary .....at 11:18 AM

Style Outperformer:
  • Mid-Cap Value (+.22%)
Sector Outperformers:
  • 1) Computer Services +1.98% 2) HMOs +.79% 3) Utilities +.57%
Stocks Rising on Unusual Volume:
  • BONT, FMCN, PUK, AVAV, CRDN, CHSI, CPWM, LWSN, PLCE, RNOW, CBST, VPHM, BLT, ORB, TRK, GBL and CMN
Stocks With Unusual Call Option Activity:
  • 1) SRX 2) FNSR 3) CEDC 4) KR 5) CIGX
Stocks With Most Positive News Mentions:
  • 1) TSCO 2) YORW 3) OXPS 4) ESV 5) G
Charts:
0 comments

Wednesday Watch

Posted by Gary .....at 1:04 AM

Evening Headlines
Bloomberg:
  • Oil Falls for a Second Day in New York as OPEC Discusses Emergency Meeting. Oil dropped for a second day as members of the Organization of Petroleum Exporting Countries considered talks about increasing production as fighting disrupts supplies from Libya. Futures dropped as much as 0.6 percent after Kuwait’s oil minister said OPEC members are weighing an “urgent” meeting to determine whether more output is needed, as Libyan rebel fighters prepared an offensive to regain a town lost to Muammar Qaddafi’s forces. U.S. crude supplies rose the most since November last week, the American Petroleum Institute said. Crude for April delivery decreased as much as 66 cents to $104.36 a barrel in electronic trading on the New York Mercantile Exchange, and was at $104.42 at 1:07 p.m. Sydney time. Yesterday, the contract lost 42 cents from the previous settlement of $105.44, the highest since Sept. 26, 2008. Prices are up 28 percent from a year ago.
  • Portugal Must Boost Investor Trust as Yields Rise, Ambassador to U.S. Says. Portugal must shore up investor confidence by meeting deficit-reduction targets and spurring economic growth, Nuno Brito, the country’s ambassador to the U.S., said as the nation prepares to sell 1 billion euros ($1.39 billion) in debt with yields hovering close to record highs. “One of our main tasks is to rebuild trust,” Brito, who assumed his post last month, said in an interview at Bloomberg News headquarters in New York yesterday. “We have no option but to be overambitious.” Portugal’s 10-year bond yield reached 7.636 percent on Feb. 10, the highest since at least 1997, according to data compiled by Bloomberg, as concern mounted the nation will need to follow Greece and Ireland in requesting a bailout from the European Union and the International Monetary Fund. Portugal’s sale of up to 1 billion euros of September 2013 notes today will be its second debt auction this year.
  • China Says Property Demand Driven by 'Unreasonable' Speculation. China’s rising property market in the past few years was driven in part by “unreasonable” demand from speculators, according to Qi Ji, Vice Minister of Housing and Urban-Rural Development. “The government’s property curbs are targeted principally at those who don’t have an immediate need for housing as accommodation,” Qi said in a press briefing in Beijing today. “Our basic aim is to direct the limited supply of housing to those who need it the most.”
  • BofA(BAC) is 'Very Active Seller' Of Commercial Real Estate, Risk Chief Says. Bank of America Corp. (BAC), the biggest U.S. lender, is a “very active seller” of commercial real estate as the firm seeks to limit losses on assets accumulated through acquisitions, Chief Risk Officer Bruce Thompson said. Commercial real estate loans in the core portfolio fell 28 percent in 2010 to $48 billion at the end of the year, the Charlotte, North Carolina-based lender said in a presentation on its website today. The decline is part of the company’s strategy to reduce so-called legacy assets, Thompson said today at an investor presentation. Thompson is working with Chief Executive Officer Brian T. Moynihan to decrease the chance of writedowns after the company repaid U.S. bailout funds that were required to bolster capital drained by lending losses.
  • The U.S. Department of Homeland Security has shut down a website used to disclose the way the department intends to spend money. The Advanced Acquisition Planning system enabled government program managers, private vendors and the general public to track the more than $13 billion in federal contracts issued by the agency every year, according to Bloomberg data. "The system was retired by the Department of Homeland Security on Feb. 28, 2011," according to a statement on the website. No explanation was provided. Federal acquisition regulations require that an advanced acquisition plan be done for any contract expected to exceed $100,000 in order to maximize opportunities for small business participation.
  • California No Longer 'Magnet' as Rate of Population Growth Slows in Census. California saw higher growth in its inland cities and counties than on the coast and found double- digit increases in its Asian and Hispanic populations over the past decade, according to 2010 Census data released today. Coastal areas tended to be “hostile to business” and development, while jobs and cheaper housing drove people inland, according to Joel Kotkin, author of, “The Next Hundred Million: America in 2050,” a book published last year about the nation’s demographic changes.
  • Australian Climate Plan Has 'Backfired' on Gillard, Lawmaker Windsor Says. The Australian government’s handling of climate change has “backfired” and Prime Minister Julia Gillard may not get a chance to submit the legislation to parliament, independent lawmaker Tony Windsor said. “I think this has backfired on the government,” Windsor, also a member of the Labor government’s multiparty climate change committee, said today in a phone interview from Bundarra, New South Wales state. “I think people want to see the detail of the climate plan rather than just the framework.” Gillard’s support fell to a record low in a Newspoll published in the Australian newspaper yesterday as voters rejected Gillard’s climate plans. The government wants to introduce a carbon price it hasn’t set from July next year before moving to an emissions trading plan, according a document released by its multiparty committee.
  • Hacking of DuPont(DD), J&J(JNJ), GE(GE) Were Google(GOOG)-Type Attacks. The FBI broke the news to executives at DuPont Co. late last year that hackers had cracked the company’s computer networks for the second time in 12 months, according to a confidential Dec. 9, 2010, e-mail discussing the investigation. About a year earlier, DuPont had been hit by the same China- based hackers who struck Google Inc. (GOOG) and unlike Google, DuPont kept the intrusion secret, internal e-mails from cyber-security firm HBGary Inc. show. As DuPont probed the incidents, executives concluded they were the target of a campaign of industrial spying, the e-mails show. The attacks on DuPont and on more than a dozen other companies are discussed in about 60,000 confidential e-mails that HBGary, hired by some of the targeted businesses, said were stolen from it on Feb. 6 and posted on the Internet by a group of hacker-activists known as Anonymous. The companies attacked include Walt Disney Co. (DIS), Sony Corp. (6758), Johnson & Johnson, and General Electric Co., the e-mails show. The incidents described in the stolen e-mails portray industrial espionage by hackers based in China, Russia and other countries. U.S. law enforcement agencies say the attacks have intensified in number and scope over the past two years. “We are on the losing end of the biggest transfer of wealth through theft and piracy in the history of the planet,” said Democratic Senator Sheldon Whitehouse of Rhode Island, who chaired a U.S. Senate Select Committee on Intelligence task force on U.S. cyber security in 2010.
Wall Street Journal:
  • U.S. Sees Stalemate Emerging in Libya. The U.S. believes Col. Moammar Gadhafi has solidified control in parts of Libya, creating a stalemate with rebels and raising the stakes in the Obama administration's internal debate about whether to take military action to help the opposition, officials said. Pro-regime forces pressed into the rebel-held city of Zawiya, near the capital, and appeared to have halted the opposition's momentum to the east in fighting Tuesday. With the struggle appearing to settle into a standoff, the Obama administration, working with allies, looked into options for intervention, while the European Union prepared to announce broader sanctions on the Libyan government, including an asset freeze. Rebels in their base in the eastern city of Benghazi, after first suggesting they had made an amnesty offer to the Libyan leader, denied any back-channel negotiations were under way.
  • China's Debt Burden Limits Policy Leeway. New Chinese government figures show its national debt load remains low compared with other major economies. But including the debts of local governments and many parts of the state-owned banking sector, as many economists say is proper, shows the constraints facing Beijing in the fight against inflation, its top economic priority. Adding up the official debt data from these other parts of the government as well as from state banks and estimated debt of asset-management companies puts China's total government liabilities at $3.55 trillion, equivalent to 59% of GDP. Some economists who follow the issue say those official data underestimate items like nonperforming loans created by a lending surge over the past two years. Stephen Green, China economist at Standard Chartered Bank, estimates total debt, including contingent liabilities, at 77% of GDP. Arthur Kroeber, managing director of Beijing-based research firm Dragonomics, puts the total debt at 75% of GDP.
  • In Health Law, Rx for Trouble. A provision intended to limit tax breaks for over-the-counter drugs in the health-care overhaul is creating headaches for doctors and new complications for retailers and pharmacies.
  • US Official: Pressure Is On Emerging Economies to Change Ways. Emerging economies such as China and India must take steps to improve the openness and access to their markets, a top State Department official said Tuesday, both for the success of international trade talks and the broader effort to rebalance the global economy.
  • Europe Blinks on Bank Test. Regulators Seen Easing 'Stress' Gauge, Undercutting Effort to Restore Confidence. European officials are poised to let regulators in individual countries use their own definitions of a key gauge of banks' health in coming "stress tests," threatening to undermine efforts to buttress faith in the Continent's ailing financial system. The new European Banking Authority, which is running the tests on 88 of Europe's biggest banks, has told regulators and bankers that the exams are likely to rely on each country's definition of an important capital ratio known as Tier 1, according to people familiar with the matter. If the plan goes through, some skeptical bankers and regulators worry, it could undermine the effort to end the European financial crisis. They fear a rerun of one of the key weaknesses in last year's stress tests by the European Union. Those results were widely panned for giving passing grades to almost all banks, including some that subsequently required taxpayer bailouts. Last year, regulators let each country use a local standard of the Tier 1 capital ratio, a measure of a bank's ability to withstand unexpected losses. That flexibility wasn't widely known when the results were announced, and the differences made it difficult to compare banks across Europe. The latest stress tests would essentially repeat the same process. Banks that fall below a certain capital threshold in a deteriorating economic environment will be forced to raise more capital. The trouble is that regulators in different countries have different methods of calculating the Tier 1 ratio. The stress tests are unlikely to establish a pan-European standard, according to the people familiar with the matter. Some regulators and bank executives worry that the lack of uniformity will damage the tests' credibility. "We're falling into the same trap," said an official at a major European bank.
  • Unions Oppose Pension Changes in California Talk. A coalition of influential labor groups in California opposes some public-pension changes that Gov. Jerry Brown has considered as part of a compromise with Republican lawmakers, further complicating the governor's hope for a quick resolution to budget talks to close a $26.6 billion deficit, said people familiar with the matter.
  • Seasoned Prosecutors Prep for 'War'. For the next 10 weeks, prosecutors will battle Galleon Group founder Raj Rajaratnam in courtroom 17B in lower Manhattan. But they will win or lose the insider-trading case in a nearby "war room."
  • Our Man-Made Energy Crisis. There's plenty of oil and no fundamental reason to expect prices of $200 per barrel. But that doesn't excuse the administration's punitive approach toward the industry.
CNBC:
  • An Open Letter From an Egyptian CEO. The following is an open letter written by the CEO of a large company based in Egypt. He is not being named out of retribution fears and concerns for his safety ... The situation worsening ... the military is barely holding on ... anarchy extending ... and the original young demonstrators are marginalized already. The economic meltdown is huge. If I may make some suggestions ...
  • Welfare State: Handouts Make Up One-Third of U.S. Wages. Government payouts—including Social Security, Medicare and unemployment insurance—make up more than a third of total wages and salaries of the U.S. population, a record figure that will only increase if action isn’t taken before the majority of Baby Boomers enter retirement. Even as the economy has recovered, social welfare benefits make up 35 percent of wages and salaries this year, up from 21 percent in 2000 and 10 percent in 1960, according to TrimTabs Investment Research using Bureau of Economic Analysis data.
Business Insider:
Zero Hedge:
Forbes:
  • We Suffer Unhealthy Budgets, Thanks to ObamaCare. This year's budget battle is only the beginning. Thanks to the new health care law, next year's budget debate is shaping up to be a real battle royale. In mid-February, President Obama released his 2011-2012 budget proposal, which would take effect this year on Oct. 1. Missing from that document was any accounting of the true cost of implementing ObamaCare. "How many federal bureaucrats does it take to carry out President Barack Obama's health care overhaul?" wrote the Associated Press. "Don't expect to find an easy answer in his new budget." The president's budget is so opaque that Rep. Dave Camp, R-Mich.--the chairman of the House Ways and Means Committee, which oversees Medicare and tax laws--has wondered whether Democrats are now trying to hide the costs of their signature piece of legislation. In reality, the president and his congressional allies have obscured the costs of ObamaCare since the beginning. In March of last year, for instance, just a few days before the health care bill became law, the Congressional Budget Office (CBO) identified "at least $50 billion" in costs associated with implementing the law for which the "authority to undertake such spending is not provided." Just a few months later, the Congressional Research Service stated that the number of new federal bureaucracies created by the health care law was "unknowable." So the White House is either hiding the cost of implementation--or simply doesn't know what that cost will be.
  • Are We Thwarting Medical Innovation? The movement to repeal the health care reform act in the U.S. merely touches the surface of a deeper problem. A better “repeal” agenda would focus on undoing, and re-thinking, much of the FDA regulatory regime and other barriers to innovation in health care. Anyone who has benefited from an MRI exam, a new drug therapy or a high-tech surgical procedure knows the value of biomedical innovation. And anyone with a disorder that still defies effective care knows the need to keep innovation going. What’s more, this innovation pays multiple economic benefits. For over a century, new medical treatments and the businesses that bring them to market have employed millions of people, helping the rest of us to be healthier and more productive in our own lines of work. Yet lately the virtuous cycle has begun to bog down. In the past 15 years, despite a doubling of federal funds for biomedical R&D, the number of new drugs approved by the FDA and coming to market has decreased by nearly half — from around 40 per year in the late 1990s to a little over 20 per year since 2005. Pre-market testing to meet FDA requirements has become such a huge factor in drug development budgets that it’s hard for companies to even consider working on new products with limited market potential. Other obstacles have grown too, mostly from a long-running accretion of government controls and bureaucratic bottlenecks.
CNN Money:
  • National Debt: 'Time for Gridlock is Over'. As lawmakers continued to butt heads over how much spending should be cut over the next seven months, a few senators on Tuesday were trying to keep the focus where they think it belongs -- the next several decades. "The time for gridlock is over. We do not have time to go around the bush and around the bush and around the bush to debate the specifics of our perfect solutions," said Republican Sen. Mike Crapo.
  • Low, Low Prices: Target(TGT) Beats Wal-Mart(WMT).
The Hill:
  • Senator Majority Harry Reid(D-Nev.) Attacks GOP Budget for Trying to Cut Money for Nevada's Cowboy Poetry Festival. Senate Majority Harry Reid (D-Nev.) slammed the Republicans' budget proposal on Tuesday as 'mean-spirited' and complained it would eliminate money for a cowboy poetry festival that brings tens of thousands of tourists to Nevada. “The mean-spirited bill, H.R. 1, eliminates National Public Broadcasting," said Reid in a floor speech. "It eliminates the National Endowment of the Humanities, National Endowment of the Arts. These programs create jobs. The National Endowment of the Humanities is the reason we have in northern Nevada every January a cowboy poetry festival. Had that program not been around, the tens of thousands of people who come there every year would not exist.” The Republican plan would slash $57 billion from the budget for the remainder of fiscal year 2011. That budget is likely to face a vote in the Senate on Tuesday evening.
Politico:
  • 'Sting' Boosts Efforts to Ax NPR Funds. Within hours after a video emerged showing NPR’s fundraising chief disparaging tea partiers as “racist” and saying the broadcaster would be better off without federal funding, Republicans in Congress seeking to de-fund NPR said they’d be only too happy to oblige. “We agree that NPR and PBS would be fine without taxpayer subsidies,” said Sen. Jim DeMint (R-S.C.), a tea party favorite who just last week introduced legislation to stop taxpayer subsidies to public broadcasting. “Forcing taxpayers to give public broadcasting hundreds of millions of dollars makes little sense when we’re facing a $14 trillion debt and there are already thousands of educational and entertainment choices in the media.
USA Today:
  • Smart Meters Raise Suspicions About Accuracy. Coast to coast, from Maine to Marin County, Calif., the number of homes being outfitted with smart meters that keep a close eye on homeowner electricity use is on the rise. And so is the number of folks who think smart meters are a dumb idea.
Reuters:
  • Libya No-Fly Zone Should Not Be U.S.-Led Effort - Clinton. The United States wants to see the international community support a no-fly zone over Libya, U.S. Secretary of State Hillary Clinton said on Tuesday, saying it was important it was not a U.S.-led effort. "We want to see the international community support it (a no-fly zone)," she told Sky News. "I think it's very important that this not be a U.S.-led effort because this comes from the people of Libya themselves. This doesn't come from the outside, this doesn't come from some Western power or some Gulf country saying 'This is what you should do.'" She also said it was important that the United Nations make the decision on what to do about Libya, not the United States.
  • Michigan Workers Jam Capital to Protest Union Plan. In a scene reminiscent of Wisconsin, hundreds of pro-union protesters jammed the Michigan state Capitol on Tuesday to oppose a bill that would give emergency managers authority to break labor deals to revive failing schools and cities.
  • CFTC Swaps Trading Plan May Stifle Market - Traders.
  • Ships Entering U.S. to Face New Ballast Water Rules. To keep new invasive species out of U.S. waters such as the Great Lakes, the United States must enact stricter rules on treating ship ballast water under a settlement reached on Tuesday with environmental groups. Under the agreement, the U.S. Environmental Protection Agency will settle on new rules by November that will go into effect in December 2013 to give shippers the chance to comply, conservation groups said. "This settlement should prompt EPA to treat 'living pollution' as aggressively as it would an oil spill or toxic release," said Thom Cmar of the Natural Resources Defense Council, one of the groups involved in the settlement.
  • Finisar(FNSR) Sees Weak Q4, Shares Plummet. Network equipment maker Finisar Corp forecast a dismal fourth quarter, blaming a surprise inventory pile-up at telecom equipment makers in China, and its shares plunged 38 percent in extended trading. The lower-than-expected outlook casts a pall of gloom on the fiber optics sector, which surged last year as wireless carriers built new LTE networks and invested in optical switches to carry a surge in wireless traffic. Finisar sells components to manufacturers of fiber optic switches that are used to manage and unclog telecom networks. Shares of larger rival JDS Uniphase(JDSU) fell 15 percent to $21.50. Oplink Communications(OPLK) slipped 11 percent, while Occlaro(OCLR) was down 14 pct at $14.31. The weak outlook from Finisar marks the second bad news for the sector in as many days, after fiber optics switch maker Ciena surprised investors with a weak second-quarter outlook. . "Things that we had forecast only at the end of last year...all of a sudden have been reduced dramatically," a Finisar executive said in a conference call with analysts. The company expects reduced order rates and capacity demands in the fourth quarter, but said it would be surprised if the inventory correction lasted three quarters. It added the problem is an industry-wide one now and was not limited to just one customer in China.
  • Texas Instruments(TXN) Earnings Target Misses Street. Texas Instruments Inc issued a current-quarter earnings target that was slightly below Wall Street estimates, blaming weaker-than-expected demand last month for chips used in personal computers. Shares in TI, which brings in 15 percent of its revenue from the PC market, fell almost 1 percent in after-hours trade, canceling almost all of their gains during regular trading.
  • Honeywell(HON) Sees Q1 at Upper End of View; To Buy Back Shares. Diversified U.S. manufacturer Honeywell International Inc expects first-quarter sales and profit to be at the high end of its previously provided outlook, and authorized a $3 billion share buyback program. Honeywell, which also reaffirmed its 2011 forecast, said it would buy back shares during 2011 to offset the dilutive impact of employee stock-based compensation plans.
Financial Times:
Toronto Star:
  • Yemeni Army Fires at Student Protesters, Wounding 98. The Yemeni government escalated its efforts to stop mass protests calling for the president’s ouster on Tuesday, with soldiers firing rubber bullets and tear gas at students camped at a university in the capital in a raid that left at least 98 people wounded, officials said. The army stormed the Sanaa University campus hours after thousands of inmates rioted at the central prison in the capital, taking a dozen guards hostage and calling for President Ali Abdullah Saleh to step down. At least one prisoner was killed and 80 people were wounded as the guards fought to control the situation, police said.Yemen has been rocked by weeks of protests against Saleh, inspired by recent uprisings in Egypt and Tunisia that drove out those nations’ leaders. Saleh, a key U.S. ally in the campaign against Al Qaeda, has been in power 32 years.
Xinhua:
  • Egypt's Muslim-Christian Clash Escalates. Clashes between Egyptian Muslims and Coptic Christians escalated on Tuesday after Coptic protestors blocked a main road in Cairo for more than two hours. Hundreds of salafists, or conservative Muslims, claimed for regaining two women who they believed were held in a church after they proclaimed their Islam belief, state MENA news agency reported. The salafists stressed the importance of not changing the second article of the constitution as the Copts called on in the nationwide demonstration, which affirms that Islam is the only source for jurisdiction. The clashes between salafists and Copts in the Autostrad road in southeast Cairo left at least one Copt dead and five people wounded, according to local media. Meanwhile, thousands of Coptic protestors continued a sit-in for the fourth day Tuesday in front of the Egyptian Radio and TV building protesting over a church that was torched in a village in Helwan Governorate, south of Cairo. They demanded ending of the sectarian clashes against them and rebuilding the burnt Shahedain church. They also called for providing protection for Copts and securing their houses along with paying compensations for the losses inflicted on them. A fight among members of a Muslim family on Friday night over the romantic relationship between a Muslim girl and a Christian merchant left two dead, including the girl's father. After the funeral, crowds of Muslims from the village directed to the Shahedain church and broke into the church before they torched it. Egypt's new Prime Minister Esssam Sharaf promised the Coptic protestors to reclaim the land of the burnt church and rebuild it. Any marriage relationship between Muslim and Christian is forbidden according to Islamic jurisdictions.
China Securities Journal:
  • China may introduce a new round of control measures on the real estate market if the property prices do not stabilize, citing Jiang Weixin, minister of Housing and Urban-Rural Development. The government may work out more detailed measures on how to contain the rises in property prices, Jiang said.
China Digital Times:
  • Latest Directives From the Chinese Ministry of Truth, March 2-7, 2011. The following examples of censorship instructions, issued to the media and/or Internet companies by various central (and sometimes local) government authorities, have been leaked and distributed online. Chinese journalists and bloggers often refer to those instructions as “Directives from the Ministry of Truth.” CDT has collected the selections we translate here from a variety of sources and has checked them against official Chinese media reports to confirm their implementation. State Council Information Office: In China 94% Are Unhappy; Top-Heavy Concentration of Wealth March 7, 2011 From the State Council Information Office: All websites are requested to immediately remove the story “In China 94% Are Unhappy; Top-Heavy Concentration of Wealth” and related information. Forums, blogs, micro-blogs, and other interactive spaces are not to discuss the matter.
Evening Recommendations
Janney Montgomery:
  • Rated (RUE) Buy, target $38.
  • Reiterated Buy on (DKS), target $44.
RBC Capital:
  • Rated (DISH) Outperform, target $30.
Night Trading
  • Asian equity indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 105.50 -3.0 basis points.
  • Asia Pacific Sovereign CDS Index 116.75 -2.75 basis points.
  • S&P 500 futures -.10%.
  • NASDAQ 100 futures -.19%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (VC)/1.29
  • (MW)/.19
  • (JAS)/1.53
  • (CWTR)/-.25
  • (MCP)/-.02
  • (HRB)/.03
  • (NAV)/.26
  • (AEO)/.43
  • (KFY)/.30
  • (PLCE)/1.00
Economic Releases
10:00 am EST
  • Wholesale Inventories for January are estimated to rise +.9% versus a +1.0% gain in December.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,000.000 barrels versus a -364,000 barrel decline the prior week. Distillate supplies are expected to fall by -500,000 barrels versus a -751,000 barrel decline the prior week. Gasoline inventories are estimated to fall by -1,500,000 barrels versus a -3,590,000 barrel decline the prior week. Finally, Refinery Utilization is expected unch. versus a +1.5% gain the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The weekly MBA mortgage applications report, $21 Billion 10-Year T-Notes Auction, Citi Resources Conference, Wedbush Morgan Tech/Media/Telecom Mgmt Access Conference, UBS Tech Conference, CSFB Equipment/Semis/Networking Conference, UBS Autos Conference, Citi Financial Services Conference, BofA Merrill Consumer Conference, (HRS) analyst meeting, (BHI) analyst conference, (XOM) analyst meeting and the (HON) investor conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and automaker shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 100% net long heading into the day.
1 comments

Tuesday, March 08, 2011

Stocks Rising into Final Hour on Lower Energy Prices, More Economic Optimism, Short-Covering, Fund Inflows

Posted by Gary .....at 3:45 PM

Broad Market Tone:
  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Slightly Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 19.51 -5.57%
  • ISE Sentiment Index 137.0 +41.24%
  • Total Put/Call .91 +2.25%
  • NYSE Arms .81 -36.28%
Credit Investor Angst:
  • North American Investment Grade CDS Index 83.85 -.78%
  • European Financial Sector CDS Index 117.58 -1.20%
  • Western Europe Sovereign Debt CDS Index 175.17 bps unch.
  • Emerging Market CDS Index 203.52 -2.44%
  • 2-Year Swap Spread 20.0 unch.
  • TED Spread 20.0 -1 bp
Economic Gauges:
  • 3-Month T-Bill Yield .10% unch.
  • Yield Curve 283.0 +2bps
  • China Import Iron Ore Spot $172.80/Metric Tonne -.69%
  • Citi US Economic Surprise Index +91.20 -2.0 points
  • 10-Year TIPS Spread 2.57% +4 bps
Overseas Futures:
  • Nikkei Futures: Indicating +65 open in Japan
  • DAX Futures: Indicating +11 open in Germany
Portfolio:
  • Higher: On gains in my Retail, Biotech, Tech and Medical longs
  • 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 moves strongly higher off its 50-day moving average, despite just a slight pullback in oil, eurozone debt angst, emerging markets inflation fears and commodity stock weakness. On the positive side, Airline, Road&Rail, REIT, Homebuilding, HMO, Hospital, Bank, Telecom, Computer Service, Computer, Software and Defense shares are especially strong, rising 2.0%+. Small-cap and Cyclical shares are strongly outperforming. (XLF) and (IYR) have also traded well throughout the day. The Transports are surging back above their 50-day moving average on volume. The Saudi sovereign cds is falling -.41% to 128.81 bps and the Israeli sovereign cds is falling -1.68% to 152.59 bps. Moreover, the UK sovereign cds is falling -2.36% to 56.0 bps. The US dollar is catching a bid and looks poised for further near-term gains. The UBS-Bloomberg Ag Spot Index is down -.35%, oil is down -.2% and copper is gaining +.34%. On the negative side, Coal, Oil Tanker, Energy, Oil Service and Ag shares are down on the day. Tech is also underperforming. The avg. US price for a gallon of gas is up another .02/gallon today to $3.53/gallon. It is now up .41/gallon in 19 days. Weekly retail sales rose +2.0% last week versus a +2.6% gain the prior week. This is the smallest weekly gain since the week of March 2, 2010, which is a negative. China Iron Ore Spot is down -10.7% in just over 2 weeks. As well, the US scrap steel benchmark has fallen -6.0% over the last week. Equity investor complacency regarding the deteriorating situation in the Mideast and the eventual negative effects of soaring commodities remains high. Speculation by funds in oil is at very extreme levels and likely caps significant near-term upside in the commodity barring any new developments in the region. Banks, Airlines and Homebuilders are leading the way today. I would like to see better quality leadership and volume on further gains. US stocks want to work higher on any stabilization in energy prices, however oil is not trading like a meaningful top is in place, as of yet. I expect US stocks to trade mixed-to-higher into the close from current levels on lower energy prices, more economic optimism, fund inflows, short-covering and bargain-hunting.

0 comments
Subscribe to: Posts (Atom)