Style Underperformer:
- Large-Cap Value +.69%
- 1) Defense -.60% 2) Utilities -.10% 3) Energy +.10%
- MANT, KMP, CVS, ATK, MWE, BAH and URBN
- 1) S 2) LCC 3) EOG 4) ITW 5) MS
- 1) MDR 2) FSLR 3) JPM 4) UPL 5) NC
Tuesday, March 13, 2012
Bear Radar
Style Underperformer:
Bull Radar
Style Outperformer:
- Small-Cap Value +.78%
- 1) Steel +2.37% 2) Oil Tankers +2.13% 3) Gaming +1.59%
- INVN, ALLT, FDS, GNC, JVA, AWI, FDS, TCB, GEOY, GDP, YELP, BKS, CNW, MCP, EBIX, SNI, SWK and STJ
- 1) ODP 2) URBN 3) AEO 4) RHT 5) CELG
- 1) EBIX 2) T 3) XLNX 4) BEAV 5) WRC
Tuesday Watch
Evening Headlines
Bloomberg:
- Spain Faces Call for Deeper Deficit Cuts as Juncker Calls Rajoy Plan Dead. European governments prodded Spain to make deeper budget cuts in a first test of stiffer fiscal rules designed to prevent the region’s debt crisis from flaring back up. Ten days after new Prime Minister Mariano Rajoy unilaterally raised the Spanish deficit target for this year, European finance chiefs called on Spain to prune an additional 0.5 percent of gross domestic product out of the 2012 budget. Rajoy’s goal of a deficit of 5.8 percent of GDP in 2012 “is dead,” Luxembourg Prime Minister Jean-Claude Juncker told reporters late yesterday after chairing a meeting of euro finance ministers in Brussels. Spain affirmed a target of reaching the euro area’s 3 percent limit in 2013.
- Euro Finance Chiefs Give Political Backing to $170 Billion Greek Aid Plan. Euro-area finance ministers signed off on a second Greek bailout, clearing the way for the first payment from the 130 billion-euro package ($170 billion) to be made this month. “The new Greek program is not only in its starting blocks, but has been politically adopted tonight by the euro group,” Luxembourg Prime Minister Jean-Claude Juncker, who heads the group of 17 finance ministers, said in Brussels late yesterday. Euro finance officials will give a formal approval on March 14, a day before the International Monetary Fund board votes on its contribution.
- Soaring Target2 Imbalances Stoke German Risk Angst: Euro Credit. German angst is growing as an entry on the Bundesbank's balance sheet swells to a sum worth about 20% of economic output, a sign of the extent to which Europe's largest economy is funding the region's laggards. The ECB's Target2 system, which calculates debts between the euro region's central banks, shows the Bundesbank is owed $656 billion, up almost 65% from a year earlier. German central bank President Jens Weidmann wrote to ECB President Mario Draghi last month to warn about growing systemic risks. "The Germans are very much justified in their concern," said John Whittaker, an economist at Lancaster University Management School. "The Target2 liabilities are just as risky and just as real as holding the government bonds of Greece and other peripherals."
- Pakistan Tells White House to Stop Drone Missions After Disputes Fray Ties. Pakistan has told the White House it no longer will permit U.S. drones to use its airspace to attack militants and collect intelligence on al-Qaeda and other groups, according to officials involved in the talks. U.S. officials, speaking on condition of anonymity because the drone program is classified, called the use of unmanned aerial vehicles such as San Diego-based General Atomics’ MQ-1 Predator and its MQ-9 Reaper a critical element in the Obama administration’s anti-terrorism strategy. Eliminating drone missions would “contribute to a resurgence of extremist groups operating in the tribal areas” along Pakistan’s border with Afghanistan, Peter Singer, author of “Wired for War: The Robotics Revolution and Conflict in the 21st Century,” said in an interview.
- Ore-Shipping Cost Seen Falling to Decade Low as China Cuts Target: Freight. Rates to ship iron ore, the second- biggest cargo after oil, are poised to drop to the lowest level in a decade after China cut its growth target, signaling weaker demand from the world’s biggest buyer of the commodity. Capesizes, each hauling about 170,000 metric tons of ore, will earn an average of $13,000 a day this year, the least since 2002, according to the median of 10 analyst forecasts compiled by Bloomberg. That’s 13 percent less than the median in January. Shares of New York-based Genco Shipping & Trading Ltd. (GNK), which operates nine of the vessels, will drop 19 percent in the next 12 months, the average of 11 estimates showed.
- Gillard's Labor Party Sinks in Poll as Mining Tax Vote Looms. Australian Prime Minister Julia Gillard’s Labor party sank to a six-week low in an opinion poll as the government, trying to recover from a leadership fight, seeks to pass into law an unprecedented tax on mining profits. Labor’s 31 percent trails opposition leader Tony Abbott’s coalition by 12 percentage points, compared with a 10-point margin in the previous survey, according to a Newspoll published in today’s Australian newspaper.
- Leukemia No Longer a Death Sentence as 90% of Children Live, Study Shows. Five-year survival rates for children diagnosed with acute lymphoblastic leukemia, the most-common type in the young, rose to 90 percent in the years 2000 to 2005 from 84 percent in 1990 to 1994, according to research today in the Journal of Clinical Oncology. Survival increased for all groups of children, except for infants 1-years-old and younger, the study said.
- Obama's Stimulus Helped Grow Debt, Not Economy: Ramesh Ponnuru.
- U.S. Will Ask for WTO's Help to Fight Chinese Curbs on Rare-Earth Exports. The U.S. will ask the World Trade Organization today to intervene with China over Chinese limits on exports of rare-earth materials used in high-tech products, according to an Obama administration official. The U.S. will join Japan and the European Union in asking the trade arbiter to begin consultations with China over its rare earths shipments, the administration official said yesterday in Washington, speaking on condition of anonymity ahead of the White House announcement. Rare earths are 17 chemically similar metallic elements used in making batteries, electric cars and wind turbines. The U.S. will argue that China’s curtailment of the exports has given the nation’s companies an unfair advantage by increasing production costs for American firms, the official said.
- Evergreen Solar to Abandon Massachusetts Factory. Evergreen Solar Inc. said it has failed to find a buyer for its Devens, Mass., plant and plans to walk away from the facility, which was launched with some $50 million in state aid. The company asked a bankruptcy judge for permission to abandon the property before a $543,000 property tax bill comes due.
- The New Cable-TV Guy: Intel. Chip Maker Working on a Web-Based Video Service to Compete With Cable, Satellite Providers.
- MF Global's Collapse Tars CME(CME) Chief's Exit. CME Group Inc.'s Chief Executive Craig Donohue will retire at year's end, in a surprise change at the world's largest futures-exchange operator as it wrestles with fallout from the collapse of brokerage MF Global Holdings Ltd.
- Fed Fights Subpoena on Bernanke. The Federal Reserve is fighting a subpoena from lawyers in a civil lawsuit who want the central bank's chairman, Ben Bernanke, to testify about conversations he had with Bank of America Corp. executives before the lender completed its purchase of Merrill Lynch & Co. The three-year-old class-action suit alleges that the Charlotte, N.C., bank and Kenneth D. Lewis, then its chief executive, misled shareholders about ballooning losses at Merrill before the $19.4 billion acquisition was approved.
- California's Greek Tragedy. No one should write off the Golden State. But it will take massive reforms to reverse its economic decline.
- Obama's Approval Rating Is Now In Total Freefall. (graph) New CBS/NYT poll puts Obama's approval rating at 41%... his lowest level ever in the series. Freefall.
- Kyle Bass Explains Why He Had The University of Texas Take Physical Delivery of $1 Billion in Solid Gold. (video)
- In A Bid To Change The Italian Economy, Mario Monti Is Fighting The Cab Drivers.
- 84% of Actively Managed Mutual Funds Did Worse Than Their Benchmarks In 2011.
- As US Rakes Largest Monthly Deficit In History, 2012 Tax Revenues Net Of Refunds Trail 2011. (graphs)
- Fed To Take Propaganda To The Schoolroom: Will Teach Grade 8-12 Students About Constitutionality Of... The Fed.
- After Greece, Here Are The Four Things That Keep Bank Of America(BAC) Up At Night.
- Sentiment in Homebuilders 'Gone Wild', Pros Say Steer Clear.
- Fed Unveils Doomsday Scenario for Banks. The Federal Reserve released its "worst-case scenario" bank stress test criteria Monday and said it will release full results Thursday at 4:30 p.m. ET.
- U.S. Subprime Mortgage Performance Weakens on Soft Home Prices. Declining home prices weakened the performance of U.S. subprime residential mortgage-backed securities collateral over the past three years, Fitch Ratings said. Fitch said changes in the remaining collateral backing the securities and an environment of falling home prices are weighing on the loans' overall performance.
Reuters:
- Yahoo(YHOO) Sues Facebook(FB) for Infringing 10 Patents. Yahoo Inc sued Facebook Inc over 10 patents that include methods and systems for advertising on the Web, opening the first major legal battle among big technology companies in social media. The lawsuit, filed in a San Jose, California federal court on Monday, marks a major escalation of patent litigation that has already swept up the smartphone and tablet sectors and high-tech stalwarts such as Apple Inc, Microsoft Corp and Motorola Mobility Holdings Inc.
- Urban Outfitters(URBN) Sees More Full-Priced Sellings. Urban Outfitters Inc said it was selling more merchandise at full prices, cheering investors after a holiday season during which the clothing retailer resorted to steep discounts in an attempt to clear inventory. The company's shares, which had crossed the $40 mark about two years ago and since then have lost nearly a quarter of their value, jumped to $31 in after-market trade. They had closed at $29.51 on Monday on the Nasdaq.
- Spain Pressed To Cut More From Its Budget. Eurozone finance ministers called on Spain to make new cuts in its 2012 budget to reduce its deficit by another 0.5 per cent of economic output, a stinging rebuke to the new government of premier Mariano Rajoy, which publicly flouted Brussels-imposed deficit targets less than two weeks ago. Despite the new cuts, Madrid will still be allowed to breach a previously agreed deficit limit of 4.4 per cent of gross domestic product this year by nearly a full percentage point; its new target will be 5.3 per cent, according to a senior eurozone official.
- Few Hedge Funds Gain in Greek Bond Saga. It was a high-risk, speculative bet in Greece’s tumultuous bond market: a wager that would pay off if the Greek government faltered in its landmark bond restructuring at the final hurdle. The gamble was thought to have been popular among the hedge fund denizens of well-healed Mayfair and leafy Connecticut – that Greece would be forced into an embarrassing repayment of its €14.4bn March 20 bond.
- Chairman of the Treasury Select Committee Calls for Greece to Exit the Euro. Andrew Tyrie, chairman of the Treasury Select Committee, tonight called for Greece to exit the euro and for the resources of the International Monetary Fund (IMF) to be significantly boosted to tackle future financial crises.
- The European Commission plans to demand the U.S. government cut subsidies to Boeing Co.(BA) within six months, citing people in the aviation industry. The demands include canceling some NASA research projects, U.S. Defense Department projects for civil aviation, as well as some state subsides for Boeing plants.
China Securities Journal:
- The People's Bank of China, the National Development and Reform Commission and five other government agencies called for a stable lending policy for first-home buyers in a joint report. The government will crack down on any attempt to avoid home purchase restrictions, the report said.
- Chinese local governments must explain measures for repaying debt when applying to the National Development and Reform Commission to sell municipal bonds. Municipal bond underwriters must provide opinions on issuers' guarantees on debt repayment.
Citigroup Global Markets:
- Reiterated Buy on (NFLX), target $130.
- Rated (IPCM) Buy, target $43.
- Rated (IEX) Buy, target $49.
- Rated (ETN) Buy, target $59.
- Asian equity indices are +.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 155.50 -3.5 basis points.
- Asia Pacific Sovereign CDS Index 127.50 +.5 basis point.
- FTSE-100 futures +.68%.
- S&P 500 futures +.49%.
- NASDAQ 100 futures +.47%.
Earnings of Note
Company/Estimate
- (FDS)/1.12
7:30 am EST
- The NFIB Small Business Optimism Index for February is estimated to rise to 94.5 versus 93.9 in January.
8:30 am EST
- Advance Retail Sales for February are estimated to rise +1.1% versus a +.4% gain in January.
- Retail Sales Less Autos for February are estimated to rise +.7% versus a +.7% gain in January.
- Retail Sales Ex Auto & Gas for February are estimated to rise +.5% versus a +.7% gain in January.
10:00 am EST
- Business Inventories for January are estimated to rise +.5% versus a +.4% gain in December.
2:15 pm EST
- The FOMC is expected to leave the benchmark Fed Funds rate at .25%.
Upcoming Splits
- (RES) 3-for-2
Other Potential Market Movers
- The IMF Meeting on Greek Bailout, Greece/Italian Bond Auctions, ECB's Draghi speaking, 10Y T-Note Auction, weekly retail sales reports, IBD/TIPP Economic Optimism Index for March, JOLTs Job Openings for January, CFTC final rule on swap data, (EPL) analyst day, (CVX) analyst meeting and the (APC) investor conference could also impact trading today.
Monday, March 12, 2012
Stocks Slightly Higher into Final Hour on Euro Bounce, Lower Energy Prices, Short-Covering, Investor Performance Angst
Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Volume: Light
- Market Leading Stocks: Performing In Line
- VIX 16.05 -6.20%
- ISE Sentiment Index 110.0 +18.28%
- Total Put/Call 1.05 +16.67%
- NYSE Arms 1.23 +6.77%
- North American Investment Grade CDS Index 95.71 +.89%
- European Financial Sector CDS Index 172.98 +4.36%
- Western Europe Sovereign Debt CDS Index 358.76 +2.04%
- Emerging Market CDS Index 237.95 -.45%
- 2-Year Swap Spread 25.75 -.25 bp
- TED Spread 39.75 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -63.50 +2.25 bps
- 3-Month T-Bill Yield .08% unch.
- Yield Curve 171.0 unch.
- China Import Iron Ore Spot $143.30/Metric Tonne +.49%
- Citi US Economic Surprise Index 38.30 -.7 point
- 10-Year TIPS Spread 2.29 unch.
- Nikkei Futures: Indicating -16 open in Japan
- DAX Futures: Indicating +15 open in Germany
- Higher: On gains in my Tech, Retail and Medical sector longs
- Disclosed Trades: None
- Market Exposure: 75% Net Long
Today's Headlines
Bloomberg:
- Third Greek Bailout Package Can't Be Exluded, Schaeuble Tells De Morgen. Greece can achieve the goal of cutting debt to 120.5 percent of economic output in 2020 though a third bailout for the nation can’t be excluded, German Finance Minister Wolfgang Schaeuble said in an interview with De Morgen. “Nobody can now exclude that Greece at a single moment may need a third bailout,” the Belgian newspaper quoted Schaeuble as saying. “I have all confidence that the measures that we have taken and that Greece must now implement -- no simple exercise -- will bring the country on the road to recovery.” Schaeuble also said he opposes broadening the European Central Bank’s mandate to something similar to that of the U.S. Federal Reserve, according to De Morgen. “The ECB cannot and must not finance state debt,” Schaeuble said in the interview. “The member states must do that themselves.”
- Portugal Yield at 13% Says Greek Deal Not Unique: Euro Credit. The good news is Greece won’t default on March 20, and 10-year borrowing costs for Spain and Italy have dropped below 5 percent. The bad news is similar- maturity Portuguese bonds still yield more than 13 percent. “The ECB liquidity is life support,” said Robin Marshall, director of fixed income in London at Smith & Williamson Investment Management, which oversees about $18 billion. “They’ve bought time but they must use the time to implement proper reform. It’s hard to see there not being more defaults, more private sector involvement. It makes it more likely we’re going to get another market rout later in the year.”
- Sovereign Bond Risk Rises After Greek Default Swaps Triggered. The cost of insuring against default on European sovereign bonds rose to the highest in eight weeks after the declaration of a credit event triggering $3.2 billion of Greek debt protection contracts. The Markit iTraxx SovX Western Europe Index of credit- default swaps on 15 governments rose four basis points to 355 at 11 a.m. in London, the highest since Jan. 18. Investors are betting against Europe's other troubled economies after the International Swaps & Derivatives Association's ruling bolstered confidence in the market for hedging sovereign bond holdings. "It was always likely that CDS would trigger," said Elisabeth Afseth, a strategist at Investec Bank Plc in London. "Confirmation may be giving bit of confidence that CDS is still useful as a hedge, and you could see the reason someone might want to protect the likes of Portugal on the back of that."
- Greece's College Students Fighting Stray Dogs as Austerity Deepens Despair. “People are pessimistic and sad,” said Konstantinos Markou, a 19-year-old law student, speaking in a lobby at the University of Athens, where dogs fought nearby and students say drug dealers and users congregate. “The sadness is all around the air.”
- Oil Declines on Signs Chinese Economic Growth Will Slow, Cutting Demand. Oil fell for the first time in four days after Chinese economic data signaled slower growth by the world’s second-largest user of crude. Futures dropped from a one-week high after China said on March 10 that the country’s trade deficit in February was the largest in at least 22 years. Government data also showed that China, the biggest consumer of crude after the U.S., had the weakest January-February factory-production gain since 2009 and retail sales below expectations. “The market is taking a hard look at what the situation is on the ground in China,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Their economic activity is very much in question.” Crude for April delivery declined $1.16, or 1.1 percent, to $106.24 a barrel at 1:10 p.m. on the New York Mercantile Exchange. Oil ended at $107.40 a barrel on March 9, the highest settlement since March 1. Prices are up 7.5 percent in 2012. Brent oil for April settlement on the London-based ICE Futures Europe exchange slid 87 cents, or 0.7 percent, to $125.11.
- Pandit Pay Climbs Toward $53 Million as Citigroup(C) Slumps. Citigroup Inc. (C), the second-worst performer in the KBW Bank Index (BKX) last year, is grappling with a revenue slump. Chief Executive Officer Vikram Pandit is not. Pandit’s $15 million pay package for 2011 and a multi-year retention package announced in May could total $53 million, based on regulatory filings and an analyst’s estimate. The CEO also received $80 million last year from the New York-based firm’s purchase of his Old Lane Partners LP hedge fund in 2007.
- Baker Hughes(BHI) Joins BP(BP), Schlumberger(SLB) On Talks to Upgrade Iraq Kirkuk Oil Field - Source.
- Four Veteran Ex-OPEC Oil Ministers Set Up Energy Alliance. Four former oil ministers of OPEC member states Iraq, Libya, Algeria and Nigeria have set up an international energy alliance to tackle various energy issues, the four said in an announcement late Sunday.
- French Authorities Reject Finance Pact. France's local authorities have refused to sign a stability pact with the government to help shore up the country's finances, said French Budget Minister Valérie Pécresse Monday.
- Angola Oil Minister Says Return to 2008 Oil Prices Could Endanger Economy. A return to oil prices not seen since 2008 could endanger the global economy, Angola's oil minister said Monday, the latest crude producer to acknowledge Middle-Eastern tensions may be pushing oil futures too high.
CNBC.com:
- High Gas Prices Threaten Stock Market Gains: Report. If history is any indication, the stock market could soon lose the resilience it has shown so far in the face of soaring oil and gasoline prices, says a new report from Morgan Stanley.
- Romney Hits Obama on Jobs. A day before two Southern primaries, Mitt Romney campaigned in Alabama on Monday, his 65th birthday, talking of eating catfish and hunting and appearing with comedian Jeff Foxworthy, famous for his "redneck" jokes.
- The Chinese Housing Bust in 3 Huge Slides.
- The Mobile Gold Rush Is Not Even Close To Peaking.
- Brand New Numbers: Here's Who's Footing The Bill For Greece's Default.
- Obama's Poll Ratings Are Tanking Again. Obama's poll ratings are falling, and he's looking weak against his Republican opponents. That's the gist of a new WaPo/ABC poll. In the new poll, 46 percent approve of the way Obama is handling his job; 50 percent disapprove. That’s a mirror image of his 50 to 46 positive split in early February. The downshift is particularly notable among independents — 57 percent of whom now disapprove — and among white people without college degrees, with disapproval among this group now topping approval by a ratio of more than 2 to 1, at 66 versus 28 percent. These groups are also the ones whose shifting support has re-shuffled prospective general-election matchups. Among registered voters, Obama is now on par with Romney (47 percent for the president, 49 percent for Romney) and Santorum (49 to 46 percent). Previously, Obama held significant advantages over both.
- The Greek PSI Lawsuits Begin.
- Mark Grant on the Increased Risks of Owning European Sovereign/Bank Debt.
- Market Shorts at 4 Year Lows, In Hibernation for Second Straight Month. (graph)
- Is The ECB Masking Accelerating Deposit Flight In Italy and Spain?
- Report Shows Depth of the Distress in Europe. While the European Central Bank’s emergency loan program late last year helped avoid a banking crisis, there is doubt over whether the action will promote economic growth by encouraging lending to businesses and consumers, according to a new report by the Bank for International Settlements.
Reuters:
Telegraph:
- Forget 'Economic Spring' - Greek Outlook is Stormy. While last week's debt swap was obviously important, there is still a very real danger of Greece needing yet another bail-out quite soon and eventually leaving the euro.
Financial Post:
- High-Yielding New Greek Bonds Fail to Lure Investors. Investors shied away from new, post-swap, Greek bonds on their first trading day on Monday, as some of the highest yields in the government debt universe were not enough to offset fears of another default or a euro zone break-up. Investors demanded yields of between roughly 14 and 19 percent to buy the new bonds. Unusually, yields on the paper maturing earlier were higher than on longer-term debt. This inversion can indicate investors fear a default. Exotix, a brokerage firm specialised in distressed debt, said Greece was the third highest yielding country in the world behind Cyprus in first place and the central American state of Belize. Debt issued by countries that rating agencies view as “highly speculative”, such as Pakistan, Iraq or Venezuela yielded less than the new Greek bonds.
- Sales and Supply of New Homes in Shanghai Fall. THE sales and supply of new residential properties in Shanghai declined last week, snapping a five-week rally that began from the end of the Spring Festival holiday, according to market data released yesterday. The buying of new homes, excluding government-funded affordable housing, fell 25.8 percent on a weekly basis to 149,400 square meters over seven days ended Sunday, Shanghai Deovolente Realty Co said.
- China's debt for road construction may have exceeded 5 trillion yuan, citing Li Zhijun, a member of the Chinese People's Political Consultative Conference. Outstanding debt on toll roads was 2.35 trillion yuan at the end of 2010, Li said.
Bear Radar
Style Underperformer:
- Mid-Cap Growth -.80%
- 1) Coal -3.20% 2) Oil Service -2.31% 3) Gold & Silver -1.73%
- FSLR, TDW, NGD, SINA, P, IMO, CSOD, IDXX, NICE, RAIL, PAAS, ARII, HITK, GMCR, MASI, ACOM, NIHD, IFSIA and FGP
- 1) STI 2) PHM 3) YOKU 4) XLE 5) SOHU
- 1) ORCL 2) LUV 3) ANR 4) BAC 5) VLO
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