North American Investment Grade CDS Index 93.43 +.41%
European Financial Sector CDS Index 89.67 -.04%
Western Europe Sovereign Debt CDS Index 189.41 unch.
Emerging Market CDS Index 205.40 +1.18%
2-Year Swap Spread 18.0 unch.
TED Spread 23.0 +1 bp
Economic Gauges:
3-Month T-Bill Yield .05% unch.
Yield Curve 272.0 -1 bp
China Import Iron Ore Spot $178.90/Metric Tonne unch.
Citi US Economic Surprise Index 10.20 -1.4 points
10-Year TIPS Spread 2.59% -1 bp
Overseas Futures:
Nikkei Futures: Indicating -11 open in Japan
DAX Futures: Indicating +18 open in Germany
Portfolio:
Higher: On gains in my Medical, Retail and Tech sector longs
Disclosed Trades: None
Market Exposure: 100% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish as the S&P 500 maintains recent gains, despite US/European debt fears, emerging markets inflation worries, rising food prices and Mideast unrest. On the positive side, Airline, Road & Rail, Gaming, REIT, Drug, Networking, Disk Drive and Internet shares are especially strong, rising more than .5%. The MS Tech Index continues to trade relatively well. Lumber is rising +.32%. The 10-Year Yield is falling -3 bps to 3.36%. The Japan sovereign cds is falling -2.87% to 77.08 bps. On the negative side, Coal and Oil Service shares are under pressure, falling more than .75%. The UBS-Bloomberg Ag Spot Index is rising +.87% and copper is falling -2.21%. The US price for a gallon of gas is rising .02/gallong today to $3.86/gallon. It is up .74/gallon in 69 days. The Greece, Ireland and Portugal sovereign cds are hovering near record highs.The US dollar continues to trade very poorly. The Shanghai Composite feel -1.51% last night, right to its 50-day moving average. Emerging markets inflation remains my number one concern. Trading still has a holiday feel to it. Today's activity appears to be another healthy consolidation of recent gains. The tech sector continues to trade much better with improving leadership and breadth. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less tech sector pessimism, earnings optimism, buyout speculation and technical buying.
U.S. New Home Sales Rose 11.1% in March. Purchases of new houses in the U.S. rose in March from a record low as the weakest industry in the economy strained to recover. New-home sales, tabulated when contracts are signed, climbed 11.1 percent to a 300,000 annual pace, faster than forecast, figures from the Commerce Department showed today in Washington. The median estimate in a Bloomberg News survey called for a rise to 280,000. The median sales price decreased 4.9 percent from the same month last year, to $213,800, today’s report showed. Purchases rose in three of four U.S. regions last month, led by a 67 percent surge in Northeast after a 54 percent slump a month earlier. Sales in the South were little changed at a 162,000 pace after February’s 163,000. The supply of homes at the current sales rate fell to 7.3 month’s worth in March from 8.2 months. There were 183,000 new houses on the market at the end of March, the fewest since August 1967, indicating builders are reducing construction.
Options Highest Since 2007 Shows Gains Intact Amid Hedging. The end of the Federal Reserve’s Treasury repurchase program is prompting options traders to pay the most in four years for protection against stock declines, a signal that proved bullish in the past. The cost of three-month put options to sell the Standard & Poor’s 500 Index is almost twice the price of calls to buy, the highest ratio since July 2007, according to data compiled by Bloomberg. The last 17 times that so-called skew rose as high, the benchmark gauge for American equities climbed a median 3.9 percent over three months, data compiled by Bloomberg show.
Barrick to Buy Equinox for $7.8 Billion. Barrick Gold Corp. (ABX), the world’s biggest gold company, agreed to buy copper producer Equinox Minerals Ltd. (EQN) for C$7.32 billion ($7.69 billion) in cash, trumping an offer from China’s Minmetals Resources Ltd. (1208).
Paulson Bought Lehman Senior Bonds For As Little as 9 Cents on the Dollar. Hedge fund Paulson & Co. paid as little as 9 cents on the dollar for some of its $4 billion in Lehman Brothers Holdings Inc. senior bonds, according to a court filing. A bondholders group including New York-based Paulson and the California Public Employees’ Retirement System made the filing in response to a U.S. bankruptcy judge’s order that the group disclose details about its members. The group is fighting to control defunct Lehman’s $61 billion liquidation with a payout plan that competes with Lehman’s own proposal. Paulson paid 9 cents on the dollar for $5.1 million of Lehman’s senior bonds on Dec. 1, 2008, according to the filing. Paulson paid 34 cents to 35 cents on the dollar for the bonds when Lehman filed bankruptcy on Sept. 15, 2008. Calpers paid 86 cents to $1.04 on the dollar for $90.1 million of Lehman’s senior bonds between July 2006 and December 2007, according to the filing, which was made on April 22. Paulson and other senior bondholders are being offered 21.4 cents on the dollar in Lehman’s liquidation plan, filed in January in U.S. Bankruptcy Court in Manhattan.
Nasdaq(NDAQ), ICE(ICE) Face Schumer Inquiry on Job Losses Amid Bid for NYSE Euronext(NYX). Nasdaq OMX Group Inc. (NDAQ) and IntercontinentalExchange Inc. (ICE) can add the scrutiny of U.S. Senator Charles Schumer to potential obstacles facing their unsolicited takeover bid for NYSE Euronext. Schumer, a New York Democrat, wrote to the companies asking for data on job losses in their $11.3 billion proposal, according to a letter dated today from Schumer’s office.
Silver, Gold Prices Rise to Records on Bets Demand in China Will Increase. Silver and gold surged to records in London on speculation that China will buy precious metals to diversify its foreign-exchange reserves. China, with more than $3 trillion in reserves, plans set up new funds to invest in energy and precious metals, Century Weekly magazine reported, citing unidentified people. Silver for immediate delivery surged to a record $49.79 an ounce, and gold reached $1,518.32 an ounce.
Corn, Wheat Advance as Adverse Weather Threatens to Reduce Global Harvests. Corn rose the most in three weeks and wheat jumped to the highest price since February as adverse weather threatened crops from the U.S. to China. Corn fields from Montana to Ohio got more than twice the normal rain over the past 30 days, and April may be the wettest on record in Indiana, Ohio and Illinois, according to T-Storm Weather LLC in Chicago. Dry weather in the southern U.S. Great Plains, China and parts of Europe will increase stress on wheat crops, the forecaster said today in a report. Corn futures for July delivery rose 15.5 cents, or 2.1 percent, to $7.60 a bushel at 10:02 a.m. on the Chicago Board of Trade. A close at that price would be the biggest gain since April 4. The grain has more than doubled in the past 12 months as global production trailed gains in demand for livestock feed and biofuels. Wheat futures for July delivery rose 20 cents, or 2.4 percent, to $8.5475 a bushel on the CBOT, after touching $8.58, the highest since Feb. 22. Before today, the price climbed 67 percent in the past year as drought spurred Russia to ban exports, while floods eroded crops in Canada and Australia.
Taliban Helps 500 Prisoners Break Out of Afghanistan Jail. Taliban guerrillas tunneled into the main jail in Kandahar, the southern Afghan city at the center of their fight with U.S. forces, releasing about 500 prisoners including insurgent commanders.
Wall Street Journal:
Syrian Military Intensifies Crackdown. At least 35 people were killed across Syria on Monday, as the government escalated its assault on antiregime protesters, according to activist accounts posted on line.
Demand Builds for TV Ad Time. As rising gasoline prices and stubbornly high unemployment hold back the U.S. economy, one marketplace still appears to be as hot as ever: TV advertising. For the second consecutive year, marketers are poised to spend more money in advance on commercials for the coming TV season than they did a year earlier, driven in part by unusually high prices for last-minute commercials this spring, according to both buyers and sellers of TV advertising. As a result, the cost of advance commercials, sold in an annual marketplace dubbed the "upfront," is expected to rise sharply.
Brazil's Rising Inflation Hampers Growth. Brazil has been battling rising inflation and this past week raised interest rates another notch to 12 percent, as inflation reached 6.44 percent.
A Harsh Look At The Real Warren Buffett. What were you thinking, Warren? At his shareholders' meeting, the oracle will have to answer for his biggest management bungle. In this week’s Newsweek, Buffett biographer Roger Lowenstein investigates the ethically “obtuse” side of the great investor.
Steve Jobs on iOS Location Issue: 'We Don't Track Anyone'. There has obviously been a lot of discussion about last week's disclosure that iOS devices are maintaining an easily-accessible database tracking the movements of users dating back to the introduction of iOS 4 a year ago. The issue has garnered the attention of U.S. elected officials and has played fairly heavily in the mainstream press. One MacRumors reader emailed Apple CEO Steve Jobs asking for clarification on the issue while hinting about a switch to Android if adequate explanations are not forthcoming. Jobs reportedly responded, turning the tables by claiming both that Apple does not track users and that Android does while referring to the information about iOS shared in the media as "false".
Texas Factory Activity Continues to Expand But At A Slower Pace. The expansion in Texas factory activity appeared to slow in April as key measures of manufacturing backed off their March levels, the Federal Reserve Bank of Dallas said Monday. The production index of the Dallas Fed’s monthly manufacturing survey fell to eight in April from a reading of 24 the previous month, “suggesting slower growth in output,” the Dallas Fed said.
Rasmussen Reports:
Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Monday shows that 22% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty percent (40%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -18 (see trends).
Reuters:
OPEC Unlikely to Change Output in June - Delegates. OPEC members with spare capacity are ready to pump above agreed limits if there is a need, but the producer group is unlikely to formally change output targets at a meeting in June, Gulf delegates told Reuters on Monday.
Financial Times:
The price of used business jets has remained low even as economies worldwide start to recover from the financial crisis, citing aircraft brokers.
China Banking Regulatory Commission may this month issue stricter rules on property trusts, after tightening regulations in November, because of a market rebound in March, citing a person from a trust company.
Profits Top Forecasts as Apple(AAPL), LG Chem Wring Out More Savings. First-quarter earnings have beaten forecasts so far, as companies from Apple Inc. (AAPL) to Novartis AG (NOVN) and LG Chem Ltd. (051910) wring more profit from operations worldwide and an economic pickup buoys sales. Since April 11, 71 percent of MCSI World Index members reporting results have topped analysts’ estimates for earnings per share, according to data compiled by Bloomberg. Profits of the 188 companies have beaten forecasts by 8.8 percent. Companies are exceeding estimates by using productivity measures to get more out of workers and factories.
Syria Detains Anti-Assad Activists After Dealiest Protests Against Regime. Syrian security forces detained at least 200 people in widespread sweeps as some officials announced their resignations following the killing of dozens of anti-government protesters, activists said. Mahmoud Merhi, who heads the Arab Organization for Human Rights, said in an interview from Damascus that 200 to 300 people have been detained since April 22. Many of those arrested were taken from their homes at night, according to Haitham al- Maleh, a member of the Syrian Human Rights Committee, who estimates “hundreds” were arrested. Syrian President Bashar al-Assad has failed to quell protests after pledging steps to meet activists’ demands and end a 48-year state of emergency. Khalil al-Rifai and Nasser al- Hariri, lawmakers from the southern town of Daraa, the scene of the deadliest clashes, resigned yesterday. The city’s top government-appointed religious leader, Mufti Rizq Abdel Dayem Abazid, also said he quit yesterday.
Toyota Says Global Output Will Return to Normal by November or December. Toyota Motor Corp. (7203) expects production to return to normal by December at the latest, as the world’s biggest carmaker struggles with supply-chain disruptions caused by Japan’s record earthquake and tsunami. The automaker will begin raising production to regular levels from July in Japan and from August at overseas plants, the company said in a statement today. Output for all models will be normal by November or December, it said.
China Property Tax 'Desperately Needed' to Fix Wealth Gap, Researcher Says. A property tax in China is “desperately needed” to “reverse” the country’s imbalances in wealth distribution, Zhang Monan, a researcher with the State Information Center, wrote in a commentary published in today’s China Daily newspaper. The nation needs to improve its property reporting system and to levy taxes on various personal holdings, including on real estate, capital earnings, inheritances and donations, Zhang wrote. The State Information Center is a research agency under the National Development and Reform Commission. China should also “moderately” shift some taxation powers to local governments from the central government to help “extricate” some local governments from excessive dependence on land for revenue, Zhang wrote.
BP's(BP) Quest for Transocean(RIG) Spill Payment May Be Helped by Report. A U.S. Coast Guard report that cited safety failures by drilling-rig owner Transocean Ltd. (RIG) may help bolster BP Plc (BP/)’s effort to recover some of the costs of last year’s oil spill in the Gulf of Mexico, an analyst said.
Yemen's Saleh May Quit in Swap for Immunity. Yemen President Ali Abdullah Saleh agreed to a plan brokered by the Gulf Cooperation Council that would give him immunity in exchange for ceding power, a government official said.
Corn Seen Topping Wheat, Raising Tyson Costs, Helping Syngenta. Corn may become costlier than wheat for the first time since 1984 as demand for livestock feed and ethanol grows, increasing expenses for Tyson Foods Inc. (TSN) and boosting sales at Syngenta AG. (SYNN)
Wall Street Journal:
U.S. Seeks to Raise Heat on Syria. The U.S. is readying sanctions against senior officials in Syria who are overseeing a violent crackdown as Washington and Europe suggest the regime of President Bashar al-Assad is increasingly fragile. The Obama administration is drafting an executive order empowering the president to freeze the assets of these senior Syrian officials and ban them from any business dealings in the U.S., according to officials briefed on the deliberations. Unilateral sanctions by Washington on Syrian officials wouldn't have much direct impact on Mr. Assad's inner circle, as most regime members have few holdings in the U.S.
Tokyo Says Risk of Radiation Leak, Explosion Receding. The immediate danger of explosions or major radiation leaks at the Fukushima Daiichi nuclear-power plant has receded, a top Japanese administration official said, even as the government and the plant's operator battle to keep it stabilized.
Wall Street, Banks Press to Shape Dodd-Frank Rules. Wall Street and the financial industry spent more to lobby Washington in the first quarter of this year than a year ago when Congress was writing sweeping financial-overhaul legislation, according to a Wall Street Journal review of lobbying reports released Thursday. The law, known as Dodd-Frank, was adopted nine months ago but banks, credit unions, investment firms and their trade groups now are trying to shape how it is put into practice. The documents show financial-industry lobbyists are spending time with regulators, who are writing hundreds of rules to carry out the law, while pushing Congress to roll-back certain provisions, especially new limits on debit-card fees.
How Health Reform Punishes Work. The subsidies to buyers of 'qualifying' insurance policies will induce sharp reductions in the supply of labor. Supporters of ObamaCare acknowledge it will have some unintended consequences. Yet surprisingly little attention has been focused on the law's most problematic provision: government subsidies to help individuals and families purchase health insurance. This new entitlement—which the chief actuary of the Centers for Medicare and Medicaid Services estimates will cost more than $100 billion per year once it is fully implemented—will damage the country's long-term fiscal outlook. It also will introduce far-reaching negative effects on rewards to work and bizarre new inequities into American life.
China PBOC Plans Forex-Reserve Investment Funds - Report. China's central bank is planning to set up investment funds targeting sectors such as energy and precious metals that will make use of the country's massive foreign-exchange reserves, and is also studying the possibility of creating a foreign-exchange stabilization fund, Caixin Media reported on its website Monday, citing unnamed sources. "Relevant authorities" are studying a suggestion by the People's Bank of China that the country's forex regulator use some of the forex assets from the PBOC's balance sheet to set up a fund to intervene in the forex market, the report said, citing a source close to the PBOC.
Japan's Defense Minister Seeks Stronger Military Ties to U.S. Japan needs to strengthen military ties with the U.S. and South Korea to keep China's military expansion in check, its defense minister said Friday, signaling that the nation's heavy post-earthquake reconstruction burden won't change its national-security priorities.
Reactor Team Let Pressure Soar. The operator of Japan's stricken nuclear plant let pressure in one reactor climb far beyond the level the facility was designed to withstand, a decision that may have worsened the world's most serious nuclear accident in a quarter century. Japanese nuclear-power companies are so leery of releasing radiation into the atmosphere that their rules call for waiting much longer and obtaining many more sign-offs than U.S. counterparts before venting the potentially dangerous steam that builds up as reactors overheat, a Wall Street Journal inquiry found.
Bank of America(BAC) Wins Dismissal From Countrywide Mortgage Securities Suit. Bank of America Corp. (BAC) was dismissed from a lawsuit brought by investors who bought mortgage-backed securities sold by Countrywide Financial Corp., the home lender Bank of America acquired in 2008. U.S. District Judge Mariana Pfaelzer granted Bank of America’s request to dismiss the claim against it on grounds that it can’t be held liable for actions of a unit, according to an April 20 order filed in Los Angeles.
Bloomberg Businessweek:
Greenpeace Occupies Oil Rig Off Istanbul. Greenpeace says its activists have climbed aboard an oil rig to prevent its departure for Greenland to begin drilling in the Arctic. The environmental group said Friday activists used speedboats to intercept and climb aboard the Leiv Eiriksson as it left Istanbul. The group said activists had unfurled a banner reading: "Stop Arctic destruction." Greenpeace said activists were prepared to occupy the rig for days. It said the oil rig, operated by Cairn Energy, has "a very short window in which to drill their four new exploratory wells" due to extreme weather conditions in the Arctic. Leiv Eiriksson, one of the world's largest rigs, had been exploring possible oil and gas in the Black Sea under a joint venture between Turkey and Brazil's Petrobas.
NY Times:
Camouflaging Price Creep. The Easter special at many retailers this year involves higher price tags. As retailers have been warning, their costs are rising as cotton and other materials get more expensive, laborers in China demand higher wages and fuel prices go up. By this fall, many have said, they must charge customers more. Because retailers pay for items about six months in advance, spring merchandise on the shelves for a few months was ordered and paid for in late summer, before costs soared. And when costs first started creeping up, clothing makers used an array of tactics to keep prices flat, whether by moving production to lower-cost countries like Bangladesh, using cheaper fabrics or ordering early to lock in prices. By this time, though, retailers are running out of ways to avoid passing on the higher expenses. An uptick has quietly begun.
Nation's Mood at Lowest Level in Two Years, Poll Shows. Americans are more pessimistic about the nation’s economic outlook and overall direction than they have been at any time since President Obama’s first two months in office, when the country was still officially ensnared in the Great Recession, according to the latest New York Times/CBS News poll. Amid rising gas prices, stubborn unemployment and a cacophonous debate in Washington over the federal government’s ability to meet its future obligations, the poll presents stark evidence that the slow, if unsteady, gains in public confidence earlier this year that a recovery was under way are now all but gone. Capturing what appears to be an abrupt change in attitude, the survey shows that the number of Americans who think the economy is getting worse has jumped 13 percentage points in just one month. Disapproval of Mr. Obama’s handling of the economy has never been broader — at 57 percent of Americans — a warning sign as he begins to set his sights on re-election in 2012.
CNN:
Source: U.S. Departs Pakistan Base.A senior Pakistani intelligence official told CNN Friday that U.S. military personnel have left a southern base said to be a key hub for American drone operations in the country's northwestern tribal areas. It is the Shamsi Air Base in Pakistan's Balochistan Province, from which drones are said to take off and where they are refueled for operations against Islamic militants. The development comes amid a public furor over American drone attacks, which have killed civilians.
Glencore Reveals Bet On Grain Price Rise. Glencore made a speculative bet on rising wheat and corn prices in the early stages of last summer’s Russian drought, the world’s largest commodity trader has revealed ahead of its initial public offering that will value the company at $60bn. As it bet on rising prices, senior traders at the Swiss-based company publicly urged Russia to impose a grain export ban. Moscow acted a few days later, triggering a grain rally. Glencore is the largest trader in Russian wheat, followed by US-based rivals Cargill and Bunge.
Sunday Times:
Deutsche Bank AG says the U.S.'s finances are in almost as bad a state as those of Greece, Ireland and Portugal. An economists' report from the bank gauging the sovereign risk of 14 advanced economies ranked the U.S. directly behind the three European nations.
Nigerian Rights Group Says More Than 500 Killed in Unrest. The explosion of unrest that followed Nigeria's presidential election has left more than 500 people dead, a local rights group said Sunday, as fears mounted over upcoming governorship ballots. Authorities have declined to confirm any death toll figures fearing reprisal attacks, though the Red Cross has spoken of many killed and says some 74,000 were displaced. "The updated figure is about 516," said Shehu Sani, head of the Civil Rights Congress organisation based in the northern state of Kaduna.
La Tribune:
Airlines Face 'Very Difficult' Year, IATA Chief Tells Tribune. Europe is the "biggest problem by far" for the airline industry with an average economic growth rate of 1.7%, and there is no consensus between European governments on taxation and harmonization of air traffic regulations, IATA President Giovanni Bisignani said. Oil prices at more than $1105 a barrel are a "disaster" for the global industry, he said.
Focus:
German Chancellor Angela Merkel is unlikely to get majority support from her government coalition for the European Stability Mechanism, German Free Democratic Party lawmaker Frank Schaeffler said.
Xinhua:
China's consumer price index may rise between 4.9% and 5.1% in the second quarter of the year, citing Xu Lianzhong, an official with the National Development and Reform Commission's Analysis and Prediction Office.
Chinese President Hu Jintao said the country's growth still faces many "risks and challenges", according to a transcript of his speech. The nation remains the world's largest developing country, Hu said.
China Finance Magazine:
China should slow the growth of its foreign-exchange reserves, otherwise efforts to curb inflation and home prices will be "greatly affected," Guan Tao, head of the State Administration of Foreign Exchange's balance of payments department, wrote.
Shanghai Securities News:
China's mutual funds reduced their combined holdings of stock at the end of the first quarter by 2.8% from the end of 2010, citing TX Investment Consulting Co.
Securities Times:
Some Chinese brokerages are reducing the number of stocks they offer clients for short selling after shorting of Henan Shuanghui Investment & Development Co. led to losses for some brokerages, citing sources at brokerages.
DebkaFile:
Mossad Races to Foil Hizballah Attack on Israeli-Jewish Targets. For the first time in Israel's 63-year old battle against terror, its external security agency Mossad Thursday night, April 21, issued a strong warning to travelling Israelis to beware of a major terrorist attack which Hizballah had already set in motion at some undisclosed location. The only information attached to the warning was that Hizballah had consigned a high-profile team for an operation to avenge the slaying of its top commander Imad Mughniyeh three years ago for which it blames Israel.
Weekend Recommendations Barron's:
Made positive comments on (OVTI) and (OMG).
Citigroup:
Reiterated Buy on (SLB), boosted target to $115.
Reiterated Buy on (MXIM), target $35.
Reiterated Buy on (RHI), target $40.
Reiterated Buy on (DD), target $65.
Reiterated Buy on (NUE), target $53.
Night Trading
Asian indices are -.25% to +.75% on average.
Asia Ex-Japan Investment Grade CDS Index 104.50 -.5 basis point.
Asia Pacific Sovereign CDS Index 111.50 -1.0 basis point.
New Home Sales for March are estimated to rise to 280K versus 250K in February.
Upcoming Splits
(HEI) 5-for-4
Other Potential Market Movers
The Dallas Fed Manufacturing Activity Index and 3-Month/6-Month Treasury Bills Auctions could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the week.
BOTTOM LINE: I expect US stocks to finish the week mixed as profit taking, eurozone/US debt angst, more shorting, Mideast unrest, rising energy/food prices and emerging market inflation fears offset mostly positive earnings reports, less tech sector pessimism and more economic optimism. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 100% net long heading into the week.
