Style Outperformer:
- Small-Cap Value (-2.21%)
- 1) Restaurants -1.03% 2) Drugs -1.13% 3) Utilities -1.26%
- USMO, AMT, EMR, LNG, SHOO, VRUS, BPI and SHOO
- 1) SYMC 2) VMED 3) SSRI 4) SPN 5) NWL
- 1) PCLN 2) LDK 3) GM 4) JEC 5) QCOM
Tuesday, November 01, 2011
Bull Radar
Style Outperformer:
Tuesday Watch
Evening Headlines
Bloomberg:
- MF Global(MF) Told SEC, CFTC of Potential 'Deficiencies' in Customer Accounts. MF Global Holdings Ltd. (MF) told U.S. regulators this morning there were potential “deficiencies” in some customer accounts, according to a joint statement from the Securities and Exchange Commission and the Commodity Futures Trading Commission. Federal regulators have found that hundreds of millions of dollars have recently gone missing from MF Global, prompting an investigation, the New York Times reported today on its website, citing several unidentified people briefed on the matter. The discovery of the missing funds, now numbering less than $700 million, scuttled MF Global's effort to sell a part of the firm to another brokerage, the Times reported. The regulators are probing whether MF Global diverted some customer money to support the firm's trades, the paper said. “For several days, the SEC, CFTC and other regulators had been closely monitoring developments affecting MF Global Inc., a jointly registered futures commission merchant and broker- dealer, in anticipation of a transaction that would include the transfer of customer accounts to another firm,” the regulators said in the e-mailed statement. “Early this morning, MF Global informed the regulators that the transaction had not been agreed to and reported possible deficiencies in customer futures segregated accounts held at the firm.” The regulators said they determined that a bankruptcy proceeding “would be the safest and most prudent course of action to protect customer accounts.” Diana DeSocio, an MF Global spokeswoman in New York, didn't immediately reply to a phone call and an e-mail from Bloomberg News requesting comment. MF Global Holdings, the holding company for the broker- dealer run by ex-Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy protection today as it seeks to reorganize after making bets on European sovereign debt. Its broker-dealer unit, MF Global Inc., faces liquidation.
- Britain's Economy May Struggle to Grow as BOE Faces Threat of Recession. Britain’s economic recovery will continue to falter in the current quarter after it struggled to build momentum in the previous three months, economists said. Gross domestic product rose 0.3 percent in third quarter compared with a 0.1 percent increase in the second quarter, according to the median of 36 forecasts in a Bloomberg News survey. The Office for National Statistics will publish the data at 9:30 a.m. in London. Manufacturing probably stagnated in October and services growth slowed, according to separate surveys of economists before reports this week.
- Iron-Ire Collapse Seen Ending Most Profitable Shipping in a Year: Freight. Steelmaker demand for iron ore, the biggest source of cargoes for commodity carriers, is weakening, threatening to end the most profitable shipping rates in almost a year. Ore stockpiles at ports in China, the largest user, already expanded to within 3.6 percent of a record, according to Antaike Information Development, a Beijing-based researcher. Chinese steelmaking is near the least profitable in almost three years, data compiled by Bloomberg Industries show. Iron-ore swaps, traded by brokers and used to bet on future costs, show no price rebound until at least 2013, according to Clarkson Securities Ltd., a unit of the world’s biggest shipbroker. ArcelorMittal, the world’s biggest steelmaker, and Angang Steel Co. are among producers that idled furnaces as slowing global growth drove benchmark prices for the metal down 15 percent since March. For capesizes, vessels hauling about 80 percent of seaborne iron ore, that means a 40 percent drop in rates in the next quarter, according to Pareto Securities AS. “The decline we have seen in both iron-ore and steel prices is a sign of slower demand in China,” said Martin Korsvold, an analyst at Pareto Securities in Oslo, whose recommendations on shipping companies have returned 13 percent in the past year. “It’s a very stark indicator of what’s going to happen for capesizes.” Benchmark iron-ore prices at the Chinese port of Tianjin fell 35 percent to $118.40 a metric ton since Sept. 7, according to The Steel Index Ltd., which publishes data on the cost of steel, ore and scrap metal.
- U.S. Raises Borrowing Estimates on Spending, Lower Revenue. The U.S. Treasury Department raised its estimate for fourth-quarter government borrowing by $21 billion to $305 billion, reflecting in part lower revenue and higher spending. The estimates set the stage for the Treasury’s quarterly refunding announcement later this week. Officials on Nov. 2 will reveal their plans for sales of longer-term notes and bonds during the current quarter. “The increase in borrowing relates to lower receipts, higher outlays and changes in the cash balance assumptions partially offset by higher net issuances of state and local government series securities,” the Treasury said in a statement today in Washington, revising upward the fourth-quarter projection of about $285 billion made three months ago. U.S. Treasury officials also project borrowing of $541 billion from January through March of next year. That projection is the highest since the October-to-December 2008 period.
- Selling More Insurance on Europe Debt Raises Risk for U.S. Banks. U.S. banks increased sales of insurance against credit losses to holders of Greek, Portuguese, Irish, Spanish and Italian debt in the first half of 2011, boosting the risk of payouts in the event of defaults. Guarantees provided by U.S. lenders on government, bank and corporate debt in those countries rose by $80.7 billion to $518 billion, according to the Bank for International Settlements. Almost all of those are credit-default swaps, said two people familiar with the numbers, accounting for two-thirds of the total related to the five nations, BIS data show. The payout risks are higher than what JPMorgan Chase & Co., Morgan Stanley and Goldman Sachs Group Inc., the leading CDS underwriters in the U.S., report. The banks say their net positions are smaller because they purchase swaps to offset ones they're selling to other companies. With banks on both sides of the Atlantic using derivatives to hedge, potential losses aren't being reduced, said Frederick Cannon, director of research at New York-based investment bank Keefe, Bruyette & Woods Inc. “Risk isn't going to evaporate through these trades,” Cannon said. “The big problem with all these gross exposures is counterparty risk. When the CDS is triggered due to default, will those counterparties be standing? If everybody is buying from each other, who's ultimately going to pay for the losses?”
- Price of Foreclosure Settlement Climbs Higher. The price tag to settle the state and federal investigation of bank foreclosure practices has increased by at least $5 billion in recent weeks, people familiar with the negotiations say. The proposal on the table now puts a $25 billion value on a settlement by the nation's five largest mortgage servicing companies—Ally Financial Inc., Bank of America Corp., Citigroup Inc., J.P. Morgan Chase & Co. and Wells Fargo & Co. In exchange for picking up a bigger tab, banks would be released from certain legal claims tied to mortgage originations. Representatives of the five banks declined to comment.
- A Slow-Growth America Can't Lead the World by John B. Taylor.
Business Insider:
Zero Hedge:
CNBC:
- No Inflation? Fed Calls Food, Energy Gains 'Temporary' Despite 24-Year Rise.
- Deficit Super Committee a 'Charade': Ken Langone.
- MF Global(MF) Slow to Turn Over Data to Regulators - Source. U.S. regulators are unhappy with the failure of MF Global Holdings Ltd to provide them with the required data and records, a source close to one regulator told Reuters on Monday. "So far they've been very disappointed with the cooperation in the fulsomeness of records and data from MF," the source said, noting regulators have been working with the firm since late last week. "They were supposed to be able to show us their books and they're supposed to be able to tell us what's what and where their customer funds are and how they've been segregated and protected and to date we don't have the information that we should have," the individual told Reuters.
- Italy, Europe, and Red Brigade Terror. Those of us in Anglo-Saxon cultures may find it remarkable that Italy still has laws that make it extremely hard for companies to lay off workers when needed. It is clearly a reason why the country has struggled to adapt to the challenge of China, rising Asia, and Eastern Europe. But that is not the point. Are such changes to be decided by Italy’s elected parliament by proper process, or be pushed through by foreign dictate when the country is on its knees? “Political ownership” is of critical importance. The EU is crossing lines everywhere, forgetting that it remains no more than a treaty organization of sovereign states. Democratic accountability is breaking down. This is dangerous. It is only a question of time before the EU itself becomes the target of terrorist attacks in a string of countries, and then what? Will the Project start to demand coercive powers? Will it acquire them? Eurosceptics have been vindicated. They warned from the start that EMU was a dysfunctional under-taking and that in order to stop it leading to calamitous failure, there would have to be ever deeper intrusions into the affairs of each state and society. This is now happening at a galloping pace. We really will end up an authoritarian supra-national octopus if this goes on much longer.
- Greece to Hold Referendum on EU Debt Deal. Greece is to hold a referendum on whether to accept the rescue package from the European Commission, European Central Bank and International Monetary Fund troika.
- Italy's Crisis Deepens on Eurozone Slump, Bail-Out Doubts. Italy's borrowing costs have once again surged to danger levels amid growing doubts over the viability of Europe's bail-out machinery, dashing hopes that last week's summit deal would at last contain the crisis.
- G-20 countries plan to bring so-called shadow-banking activities by hedge funds under the supervision of a financial regulator, citing people close to the German government.
South China Morning Post:
- Chinese Shipyards Receive Lowest Orders Since 2006. September new orders 940K deadweight metric tons, least since June 2006, citing the National Development and Reform Commission. As of Sept. 30, 30% of the nation's yards hadn't received orders. 9M orders drop 43% on year to 29M dwt. Sept. ship completions jump 67% m/m to 7.86m dwt.
- Chinese provinces including Henan, Hainan, Guangxi and Sichuan have reduced the number of affordable housing units that they'll build next year because of a cash shortage.
- None of note
- Asian equity indices are -1.25% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 183.0 +12.0 basis points.
- Asia Pacific Sovereign CDS Index 149.50 +3.5 basis points.
- FTSE-100 futures -1.31%.
- S&P 500 futures -.68%.
- NASDAQ 100 futures -.50%.
Earnings of Note
Company/Estimate
- (FSS)/.08
- (VSH)/.34
- (MLM)/1.09
- (RDC)/.38
- (OSG)/-2.37
- (DTG)/1.99
- (CKP)/.29
- (IT)/.29
- (MRO)/.84
- (COCO)/-.02
- (HCA)/.43
- (AMT)/.25
- (ABC)/.56
- (BHI)/1.22
- (EMR)/.96
- (CME)/4.69
- (OSK)/.32
- (PFE)/.55
- (ADM)/.66
- (JDSU)/.13
- (WMB)/.42
- (VLO)/1.95
- (CF)/4.93
- (HTZ)/.50
- (PBI)/.53
- (OPEN)/.30
- (DISCA)/.55
- (IPGP)/.64
- (ED)/1.33
10:00 am EST
- Construction Spending for September is estimated to rise +.3% versus a +1.4% gain in August.
- ISM Manufacturing for October is estimated to rise to 52.0 versus a reading of 51.6 in September.
- ISM Prices Paid for October is estimated to fall to 55.0 versus 56.0 in September.
- Total Vehicle Sales for October are estimated to rise to 13.2M versus 13.04M in September.
- None of note
- The weekly retail sales reports and the Needham Communications Conference could also impact trading today.
Monday, October 31, 2011
Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Global Growth Fears, Rising Financial Sector Pessimism, Technical Selling
Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Below Average
- Market Leading Stocks: Performing In Line
- VIX 27.11 +10.52%
- ISE Sentiment Index 65.0 -22.62%
- Total Put/Call 1.24 +26.53%
- NYSE Arms 2.14 +149.64%
- North American Investment Grade CDS Index 119.53 +4.36%
- European Financial Sector CDS Index 209.98 +10.52%
- Western Europe Sovereign Debt CDS Index 320.0 +2.14%
- Emerging Market CDS Index 271.55 +3.78%
- 2-Year Swap Spread 31.0 unch.
- TED Spread 44.0 +1 bp
- 3-Month T-Bill Yield -.02% -2 bps
- Yield Curve 192.0 -10 bps
- China Import Iron Ore Spot $118.40/Metric Tonne +1.28%
- Citi US Economic Surprise Index 18.0 +.2 point
- 10-Year TIPS Spread 2.11 -4 bps
- Nikkei Futures: Indicating -93 open in Japan
- DAX Futures: Indicating +214 open in Germany
- Slightly Lower: On losses in my Biotech, Tech and Medical sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and added to my (EEM) short
- Market Exposure: Moved to 50% Net Long
Today's Headlines
Bloomberg:
- Stocks, Italian Bonds Decline Amid Bailout Concern; Yen Tumbles. Stocks retreated from an almost three-month high as Italian and Spanish bonds fell amid concern European leaders will struggle to raise funds to contain the region’s debt crisis. The yen sank from a post-World War II record against the dollar after Japan intervened in the market. The MSCI All-Country World Index lost 2 percent at 11:51 a.m. New York time, trimming its monthly rally to a record 12 percent, as Deutsche Bank AG (DBK), BNP Paribas SA and Morgan Stanley (MS) dropped more than 5.6 percent. The Standard & Poor’s 500 Index slipped 1.3 percent. Italian five-year yields rose 17 basis points to 5.92 percent. German bunds and U.S. Treasuries advanced. The yen tumbled as much as 4.6 percent against the dollar, the most since 2008. Copper fell 2.3 percent in London. Stocks declined, led by banks, following the biggest weekly gain since 2009 after China’s official news agency Xinhua said the country can’t play the role of “savior” for Europe. Equities rallied on Oct. 26 amid speculation China might invest in the European rescue fund. The yen slumped after Japanese Finance Minister Jun Azumi said the government took steps to weaken the currency. Stocks and commodities also fell after a unit of MF Global Holdings Ltd. (MF) filed for bankruptcy. “Some of that rally that we’ve seen were on comments that China would provide support to Europe,” Mark Bronzo, who helps manage $23 billion at Security Global Investors in Irvington, New York, said in a telephone interview. “If you get a comment saying that they can’t be viewed as a savior, the market will react,” he said. “MF Global declaring bankruptcy is certainly not a positive for the perception about the financial sector.”
- Europe Inflation Unexpectedly Stays at 3%, Jobless Rises. European inflation unexpectedly remained at a three-year high and unemployment increased, complicating the European Central Bank’s task of bolstering the region’s faltering economy. The inflation rate in the euro area held at 3 percent in October, the same as in the previous month, the European Union’s statistics office in Luxembourg said in an initial estimate today. That’s the highest rate since October 2008. European unemployment unexpectedly rose to 10.2 percent in September from 10.1 in August, according to a separate report.
- Spain Economy Stalls in Third Quarter, Adding to Government's Difficulties. The Spanish economy stalled in the third quarter as unemployment surged, adding to the Socialist government’s difficulties three weeks before a general election. Gross domestic product stagnated from the previous quarter, when it grew 0.2 percent, the Bank of Spain in Madrid estimated today. “It will be very difficult to meet the deficit goals without additional austerity, which might push the economy back into recession,” said Ben May, a European economist at Capital Economics in London. Unemployment, which was 21.5 percent in the third quarter, may rise as high as 25 percent, he forecast. The yield on Spain’s benchmark 10-year bond, which touched an intraday euro-era record of 6.46 percent on Aug. 2, rose to 5.65 percent at 10:30 a.m. in Madrid, pushing the premium investors demand to hold Spanish 10-year bonds instead of German debt of the same tenor to 353 basis points. Spain’s Ibex-35 main share index fell 1.3 percent.
- Bond Risk Increases as Doubts Mount Over European Rescue Plan. The cost of insuring against default on corporate and sovereign debt rose in Europe as confidence in the region’s rescue plan waned. The Markit iTraxx Crossover Index of credit-default swaps on 50 companies with mostly junk credit ratings jumped 32.5 basis points to 650, according to JPMorgan Chase & Co. at 2:30 p.m. in London. The index dropped 110.5 basis points last week with a decline signaling improved perceptions of credit quality. The region’s largest banks may raise just a tenth of the total capital shortfall estimated by regulators, according to Morgan Stanley. Efforts to boost the bailout fund to 1 trillion euros ($1.4 trillion) with the help of China and cooperation of the International Monetary Fund may also prove difficult. “It’s the traditional reaction where it’s all very exciting at first and then everyone calms down, sobers up and realizes that actually nothing has changed,” Gary Jenkins, head of fixed income at Evolution Securities Ltd. in London, said in an interview on Bloomberg TV’s “The Pulse” with Maryam Nemazee. “At the moment really we don’t know much more than we did before the grand plan.” The Markit iTraxx SovX Western Europe Index of swaps on 15 governments increased 15 basis points to 305 basis points. Contracts on Italy increased 38 basis points to 443, according to CMA. Spain widened 26 basis points to 342, Ireland rose 28 basis points to 707, and France was 18 higher at 176 basis points. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings was up 9.25 at 159 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers added 13.5 basis points to 221 and the subordinated gauge was 26.5 higher at 418.5.
- Weidmann Says EU Hasn't Found Lasting Debt-Crisis Solution. European Union countries caught up in the debt crisis must cut budgets and carry out structural reforms to ensure a lasting end to the turmoil, Bundesbank President Jens Weidmann said in a column in Handelsblatt. Putting into practice last week’s EU decisions to recapitalize banks, ease Greece’s debt and leverage the euro area’s rescue fund requires enforcing strict conditionality on any aid, Weidmann, a member of the European Central Bank’s Governing Council, said in a commentary published in the Dusseldorf-based newspaper today. EU leaders left the currency union’s future shape unclear by increasingly taking on joint risk while leaving budget powers with national governments, the German central bank head wrote.
- MF Global Files for Bankcruptcy Protection. MF Global Holdings Ltd., the holding company for the broker-dealer run by former New Jersey governor and Goldman Sachs Group Inc. co-chairman Jon Corzine, filed for bankruptcy after making bets on European sovereign debt. The New York-based firm listed total debt of $39.7 billion and assets of $41 billion in Chapter 11 papers filed today in U.S. Bankruptcy Court in Manhattan. Its finance unit, MF Global Finance USA Inc., also filed, with debt of as much as $50 million and assets of as much as $500 million.
- Business Activity in U.S. Grows as Factories Accelerate Economic Recovery. Business activity in the U.S. expanded in October at about the same pace as in the prior month, a sign overseas demand and business investment will help keep the economy expanding. The Institute for Supply Management-Chicago Inc. said today its business barometer decreased to 58.4 in October from 60.4 the prior month.
- Oil Pares Biggest Monthly Rally in Two Years as Dollar Climbs. Crude oil dropped in New York as the dollar climbed and equities fell, trimming the biggest monthly gain in more than two years. Futures fell as much as 2.1 percent after Japan stepped in to foreign-exchange markets to weaken the yen against the dollar, making commodities priced in the U.S. currency less attractive to investors. Stocks retreated from a three-month high on concern European leaders will struggle to raise funds to contain the region’s debt crisis. Crude oil for December delivery declined $1.14, or 1.2 percent, to $92.18 a barrel at 10:13 a.m. on the New York Mercantile Exchange. Futures are up 16 percent this month, the biggest gain since May 2009.
- MF Global(MF): Margin Calls Threatened Liquidity.
- Herman Cain Calls Harassment Allegations 'Totally Baseless'. Herman Cain said Monday he was accused of sexual harassment while head of the National Restaurant Association during the 1990s, but called the allegations “totally baseless and totally false.”
CNBC.com:
Rasmussen Reports:
Telegraph:
- EU Leaders Didn't Listen on Debt: Trichet. Too many European Union leaders did not understand the gravity of the Greek debt situation following years of failure to adhere to rules on borrowing, the outgoing boss of the European Central Bank told CNBC. “I have to say that since the very beginning, it is something that was potentially very important, and again that one should not underestimate the gravity of a situation. We were not, I have to say, pleasing a lot of interlocutors, including the governments that had a tendency to say — no, it's not that important, it's not a big deal — and so forth,” Jean-Claude Trichet said.
- You Won't BELIEVE How Much Money Jon Corzine Could Walk Away With From MF Global(MF). A major contributor to the firm's downfall: Outsize risks taken by Corzine, as it bet heavily on European debt last year, something that obviously hasn't gone so well. So what happens when the firm goes bust, Corzine leaves, and lots of other people lose their jobs? DealBook reported that Corzine's severance package could allow him to walk away with around $12 million in the event of a sale.
- Now Check Out All The Ways Jon Corzine Is Connected To Democrats And Obama.
- The Complete List of MF Global(MF) Creditors.
- ANOTHER Solyndra: Beacon Power Files For Bankruptcy, Potentially Leaving Taxpayers On The Hook For Millions. Beacon Power, a Massachusetts-based clean energy company, filed for bankruptcy protection on Sunday Reuters reported, potentially leaving taxpayers on the hook for up to $43 million.
- John Hussman Shreds The Latest European Bailout.
- Moody's Turns Moody on Europe, Sees Bailout Risks Spreading. Hidden among the detritus of last night's MF headlines and JPY Azumification, Moody's released their Weekly Credit Outlook.
- Demand For EFSF Paper Collapses As World Wakes Up To Post Bailout Hangover.
- Presenting the Bond That Blew Up MF Global(MF). (graph)
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-two percent (42%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -20 (see trends).
Telegraph:
- The Two Halves of the Eurozone Are Locked In A Broken Marriage. One by one, the democracies of Southern Europe are being broken on the wheel of monetary union.
- Italy's labor market reforms may spur violence, Labor Minister Maurizio Sacconi said as European leaders ramped up demand that Italy's government do its part to combat the region's debt crisis. "Today I see a sequence of verbal violence, to spontaneous violence, to organized violence that I hope doesn't lead to death again," Sacconi said in an interview, referring to the 2002 murder of Marco Biagi, an economist who advised the government on changing labor laws.
- Finland is ready to assess adding a clause into European Union treaties on how a country could leave the single currency, citing government documents.
Bear Radar
Style Underperformer:
- Large-Cap Value (-1.62%)
- 1) Coal -6.04% 2) Oil Service -3.51% 3) Steel -3.40%
- BMA, VLO, NIHD, HES, UNS, HNT, IART, CYOU, AUXL, SOHU, DWA, SQI, MSTR, ASML, GMCR, ARII, TZOO, ELGX, ESIO, OPEN, FEIC, AWAY, YHOO, SYMC, CQP, HAE and IART
- 1) ALL 2) TGT 3) FXY 4) MOO 5) XLB
- 1) SNDK 2) ACI 3) FOSL 4) CP 5) TREX
Bull Radar
Style Outperformer:
- Large-Cap Growth (-1.0%)
- 1) HMOs +.48% 2) Restaurants +.27% 3) REITS -.23%
- MNTA, SPPI, VPRT, HRBN, BGS, HUM and SHAW
- 1) BBBY 2) DISH 3) HLF 4) BBY 5) WDC
- 1) ACI 2) KEG 3) JNPR 4) LMT 5) BLL
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