Friday, October 14, 2011

Stocks Surging into Final Hour on Euro Bounce, Short-Covering, Diminishing Global Growth Fears


Broad Market Tone:

  • Advance/Decline Line: Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Light
  • Market Leading Stocks: Outperforming
Equity Investor Angst:
  • VIX 28.95 -5.70%
  • ISE Sentiment Index 158.0 +31.67%
  • Total Put/Call 1.02 -.97%
  • NYSE Arms .79 -34.48%
Credit Investor Angst:
  • North American Investment Grade CDS Index 129.74 -2.97%
  • European Financial Sector CDS Index 223.65 -2.42%
  • Western Europe Sovereign Debt CDS Index 342.17 +.16%
  • Emerging Market CDS Index 298.08 -3.76%
  • 2-Year Swap Spread 39.0 +1 bp
  • TED Spread 39.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .01% unch.
  • Yield Curve 197.0 +7 bps
  • China Import Iron Ore Spot $157.50/Metric Tonne -1.69%
  • Citi US Economic Surprise Index 2.20 +2.8 points
  • 10-Year TIPS Spread 1.98 +4 bps
Overseas Futures:
  • Nikkei Futures: Indicating +99 open in Japan
  • DAX Futures: Indicating +19 open in Germany
Portfolio:
  • Higher: On gains in my Tech, Retail and Medical sector longs
  • Disclosed Trades: Covered all of my (QQQ)/(IWM) hedges and some of my (EEM) short, then added them back
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is bullish, as the S&P 500 builds on recent gains and sits right at the upper end of its 2-month range, despite Eurozone debt angst, rising food/energy prices and emerging markets inflation fears. On the positive side, Coal, Energy, Oil Service, Networking, Internet and Oil Tanker shares are especially strong, rising more than +2.5%. Cylical stocks are relatively strong and tech shares have outperformed throughout the day. Major European equity indices finished 1-2% higher on teh day. Copper is rising +3.4% and Lumber is gaining +2.1%. The Russia sovereign cds is falling -3.75% to 239.33 bps and the Brazil sovereign cds is declining -3.2% to 152.50 bps. On the negative side, Hospital, Airline, Telecom and Biotech shares are flat-to-lower on the day. Oil is rising +3.4% and the UBS-Bloomberg Ag Spot Index is rising +1.50%. Rice is still close to its multi-year high, rising +31.0% in about 13 weeks. The Germany sovereign cds is gaining +1.06% to 95.0 bps, the France sovereign cds is rising +4.16% to 183.50 bps, the Spain sovereign cds is gaining +2.58% to 379.50 bps, the Italy sovereign cds is rising +1.42% to 451.0 bps, the Ireland sovereign cds is rising +2.25% to 758.33 bps, the Japan sovereign cds is rising +3.0% to 119.0 bps, the China sovereign cds is gaining +1.78% to 146.72 bps and the UK sovereign cds is rising +4.07% to 93.0 bps. The Libor-OIS Spread is still at 32.0 bps, which is the highest since July 2010. As well, the TED, 2-Year Euro Swap and 2-Year swap spreads are still very close to their recent highs, which is also noteworthy considering the recent strong equity advance. The Western Europe Sovereign CDS Index, the European Financial Sector CDS Index and the Asia-Pacific Sovereign CDS Index are still near their records and trending higher despite their recent pullbacks. Hong Kong shares fell -1.4% last night and are now down -19.7% ytd. China Iron Ore Spot is picking up downside steam, falling -17.9% since February 16th. Investors are continuing to ignore quite a bit of bad news again today, which is a positive. The S&P 500 is still near the top end of its range over the last 2 months. I would expect to see stocks trade mixed-to-lower next week given recent gains, technical resistance and still developing global economic headwinds. One of my longs, (GOOG), had an excellent earnings report and the shares are surging almost +6%. While the stock is short-term overbought, I still believe the shares will substantially outperform the market over the intermediate-term. I expect US stocks to trade mixed-to-higher into the close from current levels on a bounce in the euro, less tech sector pessimism, short-covering and diminishing global growth fears.

Today's Headlines


Bloomberg:
  • EU Said to Consider One-Time 50% Greek Writedown. European officials are considering writedowns of as much as 50 percent on Greek bonds, a backstop for banks and continued central bank bond purchases as key planks in a revamped strategy to combat the debt crisis, people familiar with the discussions said. The Greek bond losses may be accompanied by a pledge to rule out debt restructurings in other countries that received bailouts, such as Portugal, to persuade investors that Europe has mastered the crisis, said the people, who declined to be identified because the negotiations will run for another week. In the works is a five-point plan foreseeing a solution for Greece, bolstering of the European Financial Stability Facility rescue fund, fresh capital for banks, a new push to boost competitiveness and consideration of European treaty amendments to tighten economic management. Political, technical and legal constraints cloud the crisis-resolution strategy, due to be hammered out at an emergency Oct. 23 euro-area summit in Brussels under mounting pressure from markets and politicians around the world. “The current problems of the euro zone have all the elements of a classical tragedy: a brave and exciting hero launches into the world, but is marred by fatal flaws,” David Beim, a professor at Columbia Business School in New York, said in an e-mailed research paper. “Only radical action could save the common currency.”
  • Germany Backing Italian Debt Seen Key to Europe Bank Crisis. Italian media reported last month that Prime Minister Silvio Berlusconi had been caught on wiretaps making disparaging sexual comments about German Chancellor Angela Merkel. A diplomatic blunder at any time, the insults were especially inopportune when the question haunting investors these days is whether Germany will get into bed with Italy. European bank stocks have fallen as borrowing costs climbed in recent months amid rising concern that they may have to take greater losses on debt issued by Greece, Italy, Ireland, Portugal and Spain. As policy makers seek to make lenders hold more capital to absorb potential losses, investors and analysts say the banking crisis can’t be solved unless Germany, the region’s richest country, shows it’s willing to stand behind Italy and Spain, Europe’s biggest borrowers. “What needs to happen as part of this package is that the possibility, the discussion or even remote likelihood of haircuts on Spain and Italy needs to be killed and taken out of the market,” Philippe Bodereau, a portfolio manager and global head of financial institutions credit research at Pacific Investment Management Co., said in an Oct. 12 interview with Bloomberg Television. “Bank recapitalizations are necessary but not sufficient.”
  • European Banks Face Investor Boycott in Search for Capital. Shareholders in European banks are resisting calls to pump more capital into the industry, pressure that may leave taxpayers as the investors of last resort. European Union leaders are working on a plan that may force banks to raise 100 billion euros ($137 billion) to more than 300 billion euros in additional capital, according to analysts' estimates. That money would come either from existing investors or state funding that may come with strings attached. Schroders Plc and Swisscanto Asset Management say they're reluctant to invest, given a failure to resolve the region's fiscal crisis may send financial stocks even lower. “Banks need to regain investor confidence and show how they can perform before they can raise capital,” said Peter Braendle, who helps manage 52 billion Swiss francs ($58 billion) at Zurich-based Swisscanto, including Deutsche Bank AG shares. “The market is waiting for a good solution to the sovereign- debt problems.”
  • Germany, France Disagree on EU Treaty Reform, Handelsblatt Says. Germany and France disagree over a reform of the Lisbon Treaty that would allow the European Union to influence economic policies of debt-strapped countries, the newspaper Handelsblatt reported, citing an unidentified EU official. While French President Nicolas Sarkozy favors an agreement for the 17-nation euro area, German Chancellor Angela Merkel is seeking a deal for all 27 EU states, the newspaper said. Germany wants to include a passage into the declaration following an Oct. 23 summit of leaders that would kick-start negotiations about a treaty reform, Handelsblatt added.
  • France Could Restrict Banks Right to Pay Dividends, Figaro Says. France could restrict the right of banks to pay dividends to make sure they keep lending, daily Le Figaro reported, citing an unidentified person close to the country’s finance minister Francois Baroin. The newspaper cited a person described as a financial specialist as saying that French banks wouldn’t be in their current situation had they not paid out so much in dividends over the last three years. The French government isn’t deaf to market demands for bank refinancing, the newspaper cited an unnamed person in the finance ministry as saying. The ministry believes that French banks are solid and that they don’t have problems of liquidity or solvency, Le Figaro added.
  • Luxembourg's Prime Minister Jean-Claude Juncker said European politicians will have to consider forcing investors to write down their Greek sovereign debt holdings should their contribution be insufficient.
  • China's Li 'Gravely Concerned' at U.S. Yuan Bill, Xinhua Says. China is gravely concerned about the potential passage of U.S. legislation letting companies seek duties to compensate for an undervalued yuan, Vice Premier Li Keqiang said, according to Xinhua News Agency. Politicizing economic and trade issues can only harm China- U.S. ties and obstruct the global recovery, Li told visiting former U.S. Secretary of State Condoleezza Rice today, according to the state-run news agency. Li also called on the U.S. to bear in mind the overall interests of bilateral relations, respect China’s core interests and grave concerns and properly handle sensitive issues, Xinhua reported.
  • State Revenue Under Plan Means Cuts From New York to California. New York, California and Florida are among states reporting revenue collections trailing forecasts in the fiscal first quarter, prompting preparations for a fresh round of budget reductions. California’s receipts fell more than 3 percent short of estimates for the three months through September, raising concern that school aid may be cut. In fiscal 2013, New York state may face a $2.4 billion deficit because of smaller Wall Street bonuses and job cuts, Comptroller Thomas DiNapoli said Oct. 11. States are projecting combined budget gaps of $31.9 billion in fiscal 2013, according to the National Conference of State Legislatures in Denver. A 14 percent third-quarter drop in the Standard & Poor’s 500 Index, the worst performance since the end of 2008, and concern that Europe’s debt crisis may spread have dented consumer and business confidence, curbing tax receipts.
  • China Lending Shrinks as Wen Wrestles With Inflation Over 6%. China’s bank lending last month was the least since 2009 as inflation stayed above the government’s target, highlighting the risk that efforts to tame prices will trigger a slowdown. New loans were 470 billion yuan ($73.7 billion), central bank data showed today. Consumer prices rose 6.1 percent compared with a 4 percent goal, the statistics bureau said. M2, the broadest measure of money supply, rose 13 percent from a year earlier, the least in almost a decade, and data for foreign-exchange reserves pointed to capital outflows.
  • Euro-Region Inflation Quickens on Energy Costs. European inflation accelerated to the fastest in almost three years in September on soaring energy costs, complicating the European Central Bank’s task as it combats the region’s sovereign-debt crisis. The euro-area inflation rate jumped to 3 percent last month from 2.5 percent in August, the European Union’s statistics office in Luxembourg said today. That’s the biggest gain since October 2008 and in line with an initial estimate published on Sept. 30. Energy costs jumped 12.4 percent in the period.
  • EU May Impose Limits on Commodities Derivatives, High-Frequency Trading. The European Union may impose position limits for commodities derivatives and curbs on high- frequency trading as part of plans to overhaul the region’s financial-market rules. The European Commission, the 27-nation EU’s executive arm, is seeking limits on the number of commodity derivative contracts “any given market members or participants can enter into over a specified period of time, or alternative arrangements” with the same impact, according to copies of proposals set for release on Oct. 20 that were obtained by Bloomberg News. French President Nicolas Sarkozy has demanded steps to curb commodity derivatives speculation, which he blames for driving up world food prices. He has made the issue a priority of France’s presidency this year of the Group of 20 nations.
  • IBM(IBM) May Climb Past Record to at Least $200. International Business Machines Corp. (IBM), which rose to an intraday record today, may keep climbing to $200 or more, according to analysts who are boosting their price targets for the stock. Eight of the 19 analysts with price targets surveyed by Bloomberg estimate IBM will rise to at least $200, 7.1 percent above yesterday’s close, according to data compiled by Bloomberg. Three analysts increased their price targets to $200 or more this week, ahead of IBM’s Oct. 17 earnings announcement, and Macquarie Capital began coverage with a $210 target today. “IBM’s high recurring revenue business model has ‘Goldilocks’ characteristics, allowing IBM to perform well in a good or bad macro environment,” said Louis Miscioscia, an analyst for Collins Stewart, who raised his price target to $210 today and has a “buy” rating on the stock.
  • Retail Sales in September Rose More Than Forecast. Retail sales rose in September by the most in seven months, showing American consumers are helping the world’s largest economy fend off a slump. Purchases grew 1.1 percent, exceeding the median forecast of economists surveyed by Bloomberg News, Commerce Department data showed today in Washington. Another report called into question whether gains in spending can be sustained as household confidence unexpectedly dropped this month.
Wall Street Journal:
  • China Cracks Down on Informal Lending. China's banking regulator has issued new rules to rein in off-balance-sheet lending by banks that has stoked fears about excessive credit growth and the long-term stability of the country's financial system. In a directive marked "extra urgent," according to people who have seen the document, the China Banking Regulatory Commission banned banks from moving loans off their books by repackaging them into investment products —an increasingly popular practice among banks trying to get around Beijing's lending controls aimed at bringing down inflation.
  • ECRI Leading Index Keeps Getting Worse. (graph) This is getting interesting: The Economic Cycle Research Institute’s weekly leading index is rolling over even harder, suggesting a deeper slowdown ahead, even as trailing economic data are coming in better than expected and the stock market rallies. The ECRI’s leading index fell to its lowest level in more than a year this week, as did its rolling growth rate, which fell to nearly -10%. The ECRI has declared that a recession is a done deal, based on super-secret longer leading indicators it only shares with its paying clients.
CNBC.com:
  • US Budget Deficit Hits $1.3 Trillion in Fiscal 2011.
  • Consumer Sentiment Falls, Expectations at 30-Year Low. U.S. consumer sentiment unexpectedly slumped in early October as worries about declining incomes drove consumer expectations back down to the lowest level in more than 30 years, a survey released Friday showed. The Thomson Reuters/University of Michigan's preliminary reading on the overall index on consumer sentiment sagged to 57.5 from 59.4 the month before. It fell short of the median forecast of 60.2 among economists polled by Reuters. Consumers' outlook also deteriorated with the gauge of consumer expectations falling to its lowest level since May 1980 at 47.0 from 49.4. The index had fallen to this level in early September before being revised up at the end of the month. The component has shed more than 20 points since the beginning of the year. "Overall, the data indicate that a recessionary downturn is likely to occur," survey director Richard Curtin said in a statement.
Business Insider:
Zero Hedge:
Gallup:
Reuters:
  • IMF Needs Around $350 Billion More Capital: G20 Source. The International Monetary Fund may need a capital injection of about $350 billion to give it more firepower to fight economic crises, an emerging market G20 source said on Friday. A second source at the G20 finance chiefs' talks in Paris cautioned that there was little chance of an agreement on any capital increase being agreed at their two-day meeting. The IMF is weighing whether it could expand its rescue lending capacity through debt issuance or bilateral borrowing as part of a review of its crisis-fighting resources mandated by the lender's managing director, Christine Lagarde. Should a country the size of Italy or Spain need rescuing, the IMF's funds could be severely strained. But the IMF's dominant shareholders, including the United States, Japan, Germany and China, would likely be wary of a new independent funding source that could dilute their influence. Lagarde and the IMF staff have said the Fund's existing resources could prove woefully inadequate if Europe's crisis gets worse. A staff study obtained by Reuters suggested that the IMF may face demands for $840 billion in a "worst-case" scenario.
El Pais:
  • New stress tests for European banks are set to examine all their debt holdings at market price, citing a European Union official.
Kathimerini:
  • More Greek banks will need to use the Hellenic Financial Stability Fund if the loss on their Greek government bond holdings is more than 35%, citing fund officials. A cut in the value of the banks' government bond holdings of 50% would result in almost all Greek lenders resorting to the fund, following the example of Proton Bank, which was restructured on Oct. 10 with the Financial Stability Fund as the sole shareholder.
Bank for International Settlements:
Beijing Evening News:
  • Some banks in Beijing have raised loan rates for individuals buying first homes, citing bank officials. Rates increased 5%-10% more than the benchmark interest rates.

Bear Radar


Style Underperformer:

  • Mid-Cap Value (+.94%)
Sector Underperformers:
  • 1) Hospitals -1.71% 2) I-Banks -.51% 3) Airlines -.32%
Stocks Falling on Unusual Volume:
  • CHU, TLK, NCMI, WBS, MCHP, VPRT, CBSH, EZPW, VRTX, QSII, LAMR, FCS, VMI and WBS
Stocks With Unusual Put Option Activity:
  • 1) GT 2) HBAN 3) DHR 4) EWH 5) TXN
Stocks With Most Negative News Mentions:
  • 1) RDC 2) QSII 3) AXP 4) RA 5) MON
Charts:

Bull Radar


Style Outperformer:

  • Large-Cap Growth (+1.09%)
Sector Outperformers:
  • 1) Oil Service +2.38% 2) Internet +1.97% 3) Oil Tankers +1.89%
Stocks Rising on Unusual Volume:
  • RVBD, MSTR, GOOG, PEGA, OSK, ADBE, DMND, MAKO, JBHT, NUAN, ADTN, NAV, WLT, SPN and SWKS
Stocks With Unusual Call Option Activity:
  • 1) SLE 2) TQNT 3) SWKS 4) SWN 5) WFT
Stocks With Most Positive News Mentions:
  • 1) LMT 2) MAT 3) GMCR 4) GOOG 5) T
Charts:

Friday Watch


Evening Headlines

Bloomb
erg:
  • Spain Credit Rating Cut by S&P on Weak Outlook. Spain’s credit rating was cut for the third time in three years by Standard & Poor’s as slowing growth and rising defaults threaten banks and undermine efforts to contain Europe’s sovereign-debt crisis. The ranking was reduced by one level to AA-, S&P’s fourth- highest investment grade, with the outlook remaining negative, the rating company said in a statement yesterday. Fitch Ratings downgraded Spain to the same level on Oct. 7, when the company also cut its rating on Italy. “Despite signs of resilience in economic performance during 2011, we see heightened risks to Spain’s growth prospects,” S&P said. “The financial profile of the Spanish banking system will, in our opinion, weaken further, with the stock of problematic assets rising further.”
  • Greece's Bondholders Brace for Bigger Losses to Solve Crisis: Euro Credit. Greek bondholders are preparing to lose as much as 60 percent of their investments as European leaders try to impose a solution that reduces the nation’s debt burden by enough to end the debt crisis. “Everyone is coming to the conclusion that a much deeper restructuring is needed to make Greece in any way sustainable,” said Emiel van den Heiligenberg, chief investment officer of global balanced solutions at BNP Investment Partners in London, which oversees about $742 billion. “If the stock of debt doesn’t diminish then the problems are going to be bigger and bigger and Greece will require rescue package after rescue package.” Greek 10-year bonds yielded 23.97 percent at 5 p.m. yesterday, with the price on the securities at 37.41 percent of face amount. The rate was 2,186 basis points, or 21.86 percentage points, more than benchmark German bunds and compares with a yield of 11.59 percent for similar-maturity Portuguese debt and 5.82 percent for Italian bonds.
  • Portugal Plans Deeper Cuts in Moment of 'National Emergency,' Coelho Says. Portugal plans to make deeper budget cuts next year as it faces a moment of “national emergency,” Prime Minister Pedro Passos Coelho said. “Next year the adjustment will have to be much deeper,” Passos Coelho said last night in a speech broadcast by television station RTP following a cabinet meeting to discuss the 2012 budget proposal. To meet its budget goals, Portugal has to do more than it initially planned, he said.
  • China Inflation Rises 6.1%. China’s inflation exceeded 6 percent for a fourth month as officials across Asia struggle to cool prices even as growth slows. Consumer prices increased 6.1 percent in September from a year earlier, the National Bureau of Statistics said today. That matched the median forecast in a Bloomberg News survey of 22 economists and followed a 6.2 percent gain in August. Elevated inflation is limiting Premier Wen Jiabao’s room for easing monetary policy as Europe’s debt crisis cuts demand for exports and small businesses in China report a credit squeeze. Food costs drove price gains, with pork jumping 44 percent from a year earlier, while non-food and producer prices increased at a slower pace than in the previous month. “It is too early to call a victory over inflation,” said Liu Li-Gang, a Hong Kong-based economist with Australia & New Zealand Banking Group Ltd., who previously worked for the World Bank. Producer prices rose 6.5 percent in September from a year earlier, a separate report showed. That was less than the 6.9 percent median estimate in a Bloomberg survey of economists and also the smallest gain this year. In August, the increase was 7.3 percent.
  • Mitsubishi UFJ Financial Group, Nomura Holdings and seven other Japanese financial institutions hold a total of about $13 billion in government debt of Greece, Portugal, Ireland, Spain and Italy, citing the banks' responses to a survey.
  • Singapore Cuts Growth Forecast, Eases Monetary Policy. Singapore cut its growth forecast and said it will slow currency gains, the first easing in monetary policy since 2009, as a faltering global economy undermines demand for electronics exports and financial services. Gross domestic product may increase 5 percent this year, compared with an earlier forecast range of 5 percent to 6 percent, the trade ministry said in a statement today. The central bank, which uses the island’s dollar as its main tool to manage inflation, said it will reduce the pace at which the currency strengthens and continue with a modest and gradual appreciation.
Wall Street Journal:
  • Johnson Controls(JCI) to Pare Inventories. Auto parts supplier Johnson Controls Inc. said it overestimated demand for its automotive batteries and will spend much of the next year working down its inventories. Chief Financial Officer Bruce McDonald admitted that the Milwaukee, Wis., company "took [its] eye off the ball" concerning its inventories, which ballooned by nearly 50% between mid-2010 and June 30.
  • Troubles of West Take Toll on Emerging Economies. The travails of the developed world are starting to hit fast-growing countries like China, Brazil and Indonesia, which are girding themselves to offset any economic and financial damage. From shrinking retail sales in Brazil to lower orders for manufacturers in South Africa to efforts by the Chinese government to boost the shares of its big banks, it is becoming clear that developing economies are feeling pressure from the slowdown in the West, putting global growth high on the Group of 20 agenda when financial officials meet this weekend in Paris.
  • What's Occupying Wall Street? The protestors have a point, if not the right target.
Zero Hedge:
CNBC:
  • Google(GOOG) Earnings Blow Past Expectations; Shares Surge. Google earnings and revenue blew past expectations, sending its shares sharply higher in after-hours trading. Google shares finished the day at $558.99 and jumped more than 5 percent after-hours. (Click here for the latest after-hours quote.) "Christmas came early for Google shareholders," said Colin Gillis, an analyst at BGC Partners. "It was a great beat on the bottom line. It's not necessarily because they are controlling expenses. It's because they are driving more revenue," he said.
Denver Post:
  • GE(GE) Set to Build $300 Million Solar Panel Plant in Colorado. General Electric Co. is set to announce plans to build one of the country's largest thin-film solar panel plants in Aurora creating an estimated 350 jobs, according to sources. The $300 million plant will be located in a 200,000-square-foot former L'Oreal Worldwide warehouse in the Majestic Commercenter northeast of I-70 and Tower Road. PrimeStar Solar, owned by GE, plans to begin retrofitting the warehouse next month and to double its size within the next two years, a source familiar with the deal said. When GE announced in April plans to build the plant — using technology developed by Colorado start-up PrimeStar — it set-off a pitched battle among 10 states. One source said this morning that the plant will go to Aurora and the city will provide about $20 million in incentives with the state providing roughly $2 million. In February 2007, PrimeStar and NREL signed a $780,000 cooperative agreement to move thin-film technology developed at NREL to commercial production. Four months later the company received a $3 million grant from the U.S. Department of Energy to help with development. In September 2007, GE took an undisclosed minority share in PrimeStar and eight months later turned that into a majority share.
Financial Times:
  • Policymakers Say Greek Deal Must Avoid Default. Senior European policymakers insist that any deal to persuade Greek bondholders to take a bigger hit in a new bail-out for Athens must avoid a full-scale default, a condition that could limit the size of investors’ losses.
  • Erste Faces Questions Over CDS Accounting Change. Erste Group, the Austrian bank that issued a profit warning this week which reignited concerns about the quality of European bank financial statements, is facing questions over an abrupt change in its accounting for credit derivatives.
China Daily:
  • The U.S. has "skillfully" shifted the cost of its domestic financial crisis to other countries y first nationalizing private debt and then using the dollar's positions as the global reserve currency to internationalize that debt, Zhang Monan, a researcher at China's State Information Center, writes in a commentary.
  • A survey of 1,207 Chinese businesses by the China Oriental Culture Broadcast Institute found that 51.3% of respondents said they had put money into the underground banking system in the hopes of earnings a profit.
China Securities Journal:
  • Conditions are not yet ripe for China to relax its tightening policies on the proprietary market and some of the measures may be maintained as home sales in the first half of the year were will "sound," Wang Yulin, deputy head of the policy research center at the Ministry of Housing and Urban-Rural Development said in an interview.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -1.25% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 214.0 +3.0 basis points.
  • Asia Pacific Sovereign CDS Index 155.50 -4.5 basis points..
  • FTSE-100 futures +.53%.
  • S&P 500 futures -.06%.
  • NASDAQ 100 futures +.25%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (MAT)/.86
Economic Releases
8:30 am EST
  • The Import Price Index for September is estimated to fall -.4% versus a -.4% decline in August.
  • Advance Retail Sales for September are estimated to rise +.7% versus unch. in August.
  • Retail Sales Less Autos for September are estimated to rise +.3% versus a +.1% gain in August.
  • Retail Sales Ex Auto & Gas for September are estimated to rise +.4% versus a +.1% gain in August.
9:55 am EST
  • Preliminary Univ. of Mich. Consumer Confidence for October is estimated to rise to 60.2 versus 59.4 in September.
10:00 am EST
  • Business Inventories for August are estimated to rise +.4% versus a +.4% gain in July.
2:00 pm EST
  • The Monthly Budget deficit for September is estimated to widen to -$64.9B versus -$34.6B in August.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The G-20 Finance Ministers Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 75% net long heading into the day.

Thursday, October 13, 2011

Stocks Slightly Lower into Final Hour on Rising Eurozone Debt Angst, Technical Selling, Rising Financial Sector Pessimism, Global Growth Fears


Broad Market Tone:

  • Advance/Decline Line: Lower
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 30.84 -1.25%
  • ISE Sentiment Index 116.0 +23.40%
  • Total Put/Call 1.08 -16.28%
  • NYSE Arms 1.01 +37.98%
Credit Investor Angst:
  • North American Investment Grade CDS Index 133.71 +3.31%
  • European Financial Sector CDS Index 227.32 +1.68%
  • Western Europe Sovereign Debt CDS Index 341.33 +.98%
  • Emerging Market CDS Index 308.90 +1.28%
  • 2-Year Swap Spread 38.0 +1 bp
  • TED Spread 39.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .01% unch.
  • Yield Curve 190.0 -3 bps
  • China Import Iron Ore Spot $160.20/Metric Tonne -1.11%
  • Citi US Economic Surprise Index -.60 +.9 point
  • 10-Year TIPS Spread 1.94 -5 bps
Overseas Futures:
  • Nikkei Futures: Indicating -9 open in Japan
  • DAX Futures: Indicating +48 open in Germany
Portfolio:
  • Higher: On gains in my Tech, Retail and Biotech sector longs
  • Disclosed Trades: Added to my (QQQ)/(IWM) hedges and to my (EEM) short, then covered some of them
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bullish, as the S&P 500 consolidates recent gains, despite rising Eurozone debt angst, rising financial sector pessimism, technical selling, rising food prices and global growth fears. On the positive side, Disk Drive, Biotech, Airline and Restaurant shares are especially strong, rising more than +1.0%. Tech shares have outperformed throughout the day. Gold is falling -.66% and oil is falling -.7%. The Israel sovereign cds is falling -3.09% to 163.38 bps and the US sovereign cds is declining -4.5% to 46.35 bps. On the negative side, Defense, Bank, HMO, Insurance, REIT, Gaming, Education and Road & Rail shares are under pressure, falling more than 1.0%. (XLF) has traded poorly throughout the day. Lumber is falling -2.66%, copper is down -2.02% and the UBS-Bloomberg Ag Spot Index is rising +1.09%. Rice is still close to its multi-year high, rising +29.5% in about 13 weeks. The Germany sovereign cds is gaining +5.22% to 94.0 bps, the France sovereign cds is rising +6.02% to 176.17 bps, the Spain sovereign cds is gaining +3.76% to 369.55 bps, the Italy sovereign cds is rising +4.83% to 444.67 bps, the Portugal sovereign cds is rising +3.74% to 1,137.67, the Ireland sovereign cds is rising +4.46% to 741.67 bps, the Belgium sovereign cds is gaining +6.54% to 307.0 bps and the UK sovereign cds is rising +6.91% to 90.17 bps. The Libor-OIS Spread is still at 32.0 bps, which is the highest since July 2010. As well, the TED, 2-Year Euro Swap and 2-Year swap spreads are still very close to their recent highs, which is also noteworthy considering the recent strong equity advance. The Western Europe Sovereign CDS Index, the European Financial Sector CDS Index and the Asia-Pacific Sovereign CDS Index are still near their records and trending higher despite their recent pullbacks. Major European equity indices fell 1-3% today. China Iron Ore Spot is picking up downside steam, falling -16.5% since February 16th. The AAII % Bulls jumped to 39.77 this week, while the % Bears fell to 36.4, which is a large negative given the macro backdrop and the fact that the average stock is down -20.1% in less than 6 months. Investors are ignoring a lot of bad news today, which is a positive. The S&P 500 is still near the top end of its range over the last 2 months. I still suspect stocks will, at best, thrash around current levels over the near-term unless earnings outlooks are stronger than I expect over the coming days. I expect US stocks to trade mixed-to-lower into the close from current levels on profit-taking, more shorting, technical selling, rising Eurozone debt angst, rising financial sector pessimism and global growth fears.