Friday, March 23, 2012

Today's Headlines

Posted by Gary .....at 3:02 PM

Bloomberg:
  • Italy’s Labor Reform Won’t Spur Firings, Napolitano Says. Prime Minister Mario Monti's Cabinet approved a bill to overhaul Italy’s labor laws that will ease firing rules, facing down opposition from unions and political allies needed to pass the measure in Parliament. The Cabinet in Rome passed the changes as a draft law, as Monti decided against resorting to a decree that would have implemented the measures immediately and limited parliamentary debate on changing the draft. The government didn’t say when the measures would be presented to Parliament. The law “intends to create a dynamic, flexible and inclusive labor market capable of contributing to growth and creating quality employment,” Monti’s office said in an e- mailed statement.
  • Oil Rises Almost $3 a Barrel on Iran Report. Oil surged almost $3 a barrel after Reuters reported Iranian oil exports will drop by 300,000 barrels a day this month because of tighter sanctions. Futures jumped more than 2 percent in three minutes on the New York Mercantile Exchange, topping $108 a barrel for the first time in four days, following the report, which cited Petrologistics, a Geneva-based consultant. Stephen Schork, president of the Schork Group in Villanova, Pennsylvania, said the gain may have triggered traders’ automatic buy orders. Crude oil for May delivery rose $1.60, or 1.5 percent, to $106.95 a barrel at 12:22 p.m. on the New York Mercantile Exchange. Earlier, it touched $108.25 a barrel. Prices have slipped 11 cents this week and are up 8.2 percent this year. Brent oil for May settlement gained $1.89, or 1.5 percent, to $125.14 a barrel on the London-based ICE Futures Europe exchange.
  • Sales of New Houses in U.S. Decrease for Second Month: Economy. Purchases of new homes in the U.S. unexpectedly fell in February for a second month, a sign the recovery in the housing market may be uneven. Sales dropped 1.6 percent to a 313,000 annual pace, the slowest since October, from a 318,000 rate in January that was weaker than previously reported, figures from the Commerce Department showed today in Washington. The median estimate of 78 economists surveyed by Bloomberg News called for 325,000.
  • KB Home(KBH) Falls the Most Since June After Orders Declined. KB Home (KBH), the Los Angeles-based homebuilder that targets first-time buyers, fell the most in almost nine months after it reported a decline in orders and government data showed new-home sales dropped in February. KB Home had a net loss for the three months ended Feb. 29 of $45.8 million, or 59 cents a share, down from $114.5 million, or $1.49, a year earlier, the company said today in a statement. Analysts expected a loss of 23 cents a share, the average of 17 estimates in a Bloomberg survey. Net orders fell 8 percent from a year earlier to 1,197 homes. KB Home dropped as much as 15 percent in New York trading, the most since June 29. It lost 9.5 percent to $10.18 as of 11:27 a.m.
  • NYC Office Leasing Lowest Since 2009 as Wall Street Cuts Back. Manhattan office leasing in the first quarter is poised to be the lowest in almost three years as Wall Street cut jobs and needed less space, according to preliminary data from brokerage Studley Inc. Agreements will be signed for the rental of about 5.7 million square feet (530,000 square meters) this year through March, according to New York-based Studley's projection. That's the smallest three-month tally since the 4.5 million square feet leased in the second quarter of 2009, months after the credit crisis pushed Lehman Brothers Holdings Inc. into bankruptcy and froze demand for space in the biggest U.S. office market.
  • China Banks Said to Underestimate Local Government Risks. Chinese banks misclassified about 20 percent of their outstanding loans to local governments, understating the risk that slowing revenue will cut borrowers’ ability to repay, a person with knowledge of the matter said. The China Banking Regulatory Commission told lenders last month that they had incorrectly placed about 1.8 trillion yuan ($286 billion) of loans to local government financing vehicles in the safest category of lending, the person said, declining to be named because the matter is private. The banks erred in calculations and underestimated risks when they decided the loans were fully covered by cash flows from the projects, the person said.
  • BATS Global(BATS) IPO Turns Ugly After Apple(AAPL) Halt, Quote Error. Bats Global Markets Inc. (BATS), the six-year-old equity exchange, saw its debut as a public company go haywire as a system error caused incorrect price quotes and Apple Inc. (AAPL) was halted due to a transaction on its platform.
  • Dartmouth President Kim Nominated by Obama for World Bank. Dartmouth College President Jim Yong Kim was nominated today to head the World Bank, making him the first physician and Asian-American to lead the $57 billion lender that’s seeking to improve health care and education in developing nations. Kim, 52, a Seoul-born U.S. citizen who emigrated with his parents from South Korea at age five, would succeed Robert Zoellick, a former U.S. trade representative whose term ends in June. The U.S. is the biggest shareholder in the Washington- based bank, and its president has always been an American.
Wall Street Journal:
CNBC.com:
Business Insider:
 Zero Hedge:
Seeking Alpha:

Gallup:

Rasmussen Reports:

  • Daily Presidential Tracking Poll. The Rasmussen Reports daily Presidential Tracking Poll for Friday shows that 24% of the nation's voters Strongly Approve of the way that Barack Obama is performing his role as president. Forty-one percent (41%) Strongly Disapprove, giving Obama a Presidential Approval Index rating of -17 (see trends).

Reuters:

  • Iran Oil Exports Fall As Sanctions Take Toll. Iranian oil exports have fallen significantly in March, industry sources said on Friday, as some buyers stop or scale back purchases to abide by Western sanctions aimed at slowing Tehran's nuclear programme. Crude exports from Iran appear to have fallen this month by around 300,000 barrels per day (bpd), or 14 percent, according to estimates from industry consultant Petrologistics and a large European oil company. It is the first sizeable drop in oil shipments from the OPEC producer since the European Union announced in January plans to embargo Iran's crude from July and Washington and Brussels sanctioned Iran's central bank.
  • Gold Rises More Than 1%, Set To End 3-Week Drop.
  • Akamai(AKAM) CEO Sets $5 Billion Revenue Target by 2020.

USA Today:

  • Romney: Why I'd Repeal ObamaCare. Friday is the second anniversary of ObamaCare. It is past time to abolish the program, root and branch. The Supreme Court will soon have a crack at this; arguments about the program's constitutionality open before it next week. But whatever the justices decide in what is certain to be a landmark decision, the case against ObamaCare extends far beyond questions about its constitutionality. President Obama's program is an unfolding disaster for the American economy, a budget-busting entitlement, and a dramatic new federal intrusion into our lives.

International Business Times:

  • Japan Readies Missile Defense Against North Korea Rocket Launch. Japan's military is preparing its missile defense systems in response to a planned rocket launch next month by North Korea, according to reports. "I have ordered officials to prepare to deploy the PAC-3 [surface-to-air missiles] and Aegis warships [destroyers]," Defense Minister Naoki Tanaka told reporters. "We are talking to relevant local governments about the deployment."
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Bear Radar

Posted by Gary .....at 2:01 PM

Style Underperformer:
  • Mid-Cap Growth +.10%
Sector Underperformers:
  • 1) Homebuilding -1.43% 2) Education -.93% 3) Retail -.49%
Stocks Falling on Unusual Volume:
  • HNP, MXWL, DELL, KORS, NKE, GEL, AIR, MAPP, WTW, CVG, KBH, LAYN, SNDK, WF and DGX
Stocks With Unusual Put Option Activity:
  • 1) KBH 2) WLL 3) RRC 4) TOL 5) XLV
Stocks With Most Negative News Mentions:
  • 1) XLNX 2) AET 3) KBH 4) ANR 5) CNX
Charts:
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Bull Radar

Posted by Gary .....at 11:39 AM

Style Outperformer:
  • Large-Cap Value +.44%
Sector Outperformers:
  • 1) Gold & Silver +2.15% 2) Coal +1.93% 3) Oil Service +1.27%
Stocks Rising on Unusual Volume:
  • SLW, CRZO, VELT, INFI, WIFI, AFFY, CPWM, UTIW, GPOR, MDSO, ESL and MWW
Stocks With Unusual Call Option Activity:
  • 1) NKE 2) LSI 3) STD 4) ERX 5) KBH
Stocks With Most Positive News Mentions:
  • 1) DG 2) DFS 3) FDX 4) MO 5) MWW
Charts:
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Friday Watch

Posted by Gary .....at 12:31 AM

Evening Headlines
Bloomberg:
  • Portugal Town Halls Face Default Amid $12 Billion Debt. Portugal’s town halls face default amid 9 billion euros ($12 billion) of debt unless the government provides aid soon, said Fernando Ruas, president of the nation’s association of municipalities. “At a company we call it insolvency,” Ruas said in a telephone interview from Lisbon on March 21. “It could happen that some town halls could have to restructure their debt if the government doesn’t intervene.” Ruas blamed a sharp decline in money transfers from the government in Lisbon to municipalities for their growing financial woes. Portugal last year became the third euro-area country to request external aid, following Greece and Ireland. Prime Minister Pedro Passos Coelho is cutting spending and raising taxes to meet the terms of the 78 billion-euro rescue. “A sharp decrease in money transfers has made it harder for many town halls to comply with their ongoing commitments,” said Ruas. His association estimates town halls face about 9 billion euros in liabilities. The southern European country’s 308 town halls and two semi-autonomous regions face similar problems to those of Spain, whose regions have been shut out of capital markets due to the credit squeeze, leaving many bills to suppliers unpaid. Spain’s government is offering credit lines to help regions meet bond redemptions and pay suppliers.
  • China's Stocks Drop on Earnings, European Concerns. China’s stocks fell, extending the benchmark index’s biggest weekly loss in four months, as European manufacturing weakened and concern intensified slowing economic growth is hurting earnings. China United Network Communications Ltd. (600050), which controls the nation’s second-largest cell phone operator, dropped 0.9 percent after the company reported profit that trailed analyst estimates. Agricultural Bank of China Ltd. declined 0.4 percent after the lender posted its first quarterly profit decline in two years. Poly Real Estate Group Co. and Gemdale Corp. slid more than 1 percent after the Economic Information Daily said the nation may expand property tax trials. “The prospect of negative earnings in the first quarter hasn’t been priced in yet,” said Wang Weijun, an analyst at Zheshang Securities Co. in Shanghai. “Bad data from Europe may also change investors’ risk appetite.” The Shanghai Composite Index (SHCOMP) dropped 16.20 points, or 0.7 percent, to 2,359.57 at the 11:30 a.m. local-time break, the lowest level since Feb. 17.
  • Fed's Bullard Says Monetary Policy May Be at a Turning Point. Federal Reserve Bank of St. Louis President James Bullard said monetary policy may be at a turning point and the Fed should be cautious about stepping up accommodation as the U.S. economy rebounds. With policy currently “on pause, it may be a good time to take stock of whether we may be at a turning point,” Bullard said in a speech in Hong Kong today. “As the U.S. economy continues to rebound and repair,” further action “may create an overcommitment to ultra-easy monetary policy.” “With numerous monetary policy actions still on the table, and others still affecting the economy with a lag, it may be especially difficult to remove policy accommodation at the appropriate pace and at the appropriate time,” Bullard said at an investment conference sponsored by Credit Suisse Group AG. “One may want to approach such a situation with caution.” Inflation remains higher than the Fed’s target of 2 percent, which may indicate the U.S. economy has less slack than most economists estimate, he said.
  • Copper Bear Streak Extends as Manufacturing Shrinks: Commodities. Copper traders extended a bearish streak into a second week on mounting concern that demand is weakening after manufacturing contracted from China to Europe. Twelve of 29 analysts surveyed by Bloomberg expect the metal to decline next week and seven were neutral. Inventories at bonded warehouses in Shanghai more than doubled since the fourth quarter, a survey of seven traders and analysts showed. Separate stockpiles monitored by the Shanghai Futures Exchange are their highest in at least nine years, bourse data show. China consumes 40 percent of the world’s copper.
  • Volcker Rule Delay and Simplification Gains Support in Congress. A bipartisan group of U.S. lawmakers is backing a delay in finalizing a ban on proprietary trading by banks without urging regulators to ease the rule. Six senators introduced legislation yesterday that would postpone implementation of the so-called Volcker rule from the July 21 deadline set by the Dodd-Frank Act and align it with regulators' completion of detailed rules for the trading ban. Meanwhile, Representative Barney Frank, the Massachusetts Democrat who co-authored the law that requires regulators to impose the ban, released a statement urging banking agencies to complete a simplified version by Sept. 3.
  • Credit Swaps in U.S. Rise by Most This Year on Global Concerns. A benchmark gauge of U.S. company credit risk rose by the most since December on declining confidence in the global economy as reports showed manufacturing contracted in Europe and China. The Markit CDX North America Investment Grade Index of credit-default swaps, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, increased 3.7 basis points to a mid-price of 90.5 basis points at 4:50 p.m. in New York, according to Markit Group Ltd.
  • JPMorgan(JPM) Told to Pay $373 Million in American Century Funds Case. JPMorgan Chase & Co. (JPM) was ordered by arbitrators to pay $373 million to American Century Investments over claims that executives led by Jes Staley enriched the bank at the expense of the fund-management firm.
  • Living Together Trumps Matrimony for Recession-Wary Americans. The probability of a woman getting married by age 25 dropped to less than half as more Americans opt to cohabitate with their romantic partners rather than tie the knot, a U.S. government study shows. The proportion of women living with men without marriage almost quadrupled to 11 percent as of 2010 from 3 percent in 1982, according to data released today by the Centers for Disease Control and Prevention. For men, the proportion rose to 12 percent in 2010 from 9 percent in 2002, said Casey Copen, a demographer at the National Center for Health Statistics.
  • Missing Nukes Fuel Terror Concern as Obama Drawn to Seoul. The legacy of the Soviet Union’s breakup, inadequate atomic stockpile controls and the proliferation of nuclear-fuel technology mean the world may be awash with unaccounted-for weapons ingredients, ripe to be picked up by terrorists. “If material is loose, it may already be impossible to contain or account for it,” said Graham Allison, director of Harvard University’s international security program and a former nuclear-security adviser to President Ronald Reagan. “There are no precise figures for how much high-enriched uranium or plutonium is missing.”
Wall Street Journal:
  • Health Law Slow to Win Favor. When the health-care overhaul became law after a bitter debate, many Democrats predicted Americans would grow to like it as they started enjoying some of the early benefits. The day after the president signed the bill into law, which happened exactly two years ago, an average of major polls collated by the website Real Clear Politics showed 50.4% of Americans opposed. This week, that had changed only by a tenth of a percentage point, ticking up to 50.5%.
  • Liberty and ObamaCare.
  • A French Killer's Path to Jihadist Rampage. The death of Mohamed Merah, the suspected French killer who met his end Thursday in a barrage of special-forces gunfire, left officials piecing together how he became the alleged homegrown terrorist behind the most violent attacks on French soil in almost two decades.
MarketWatch:
 Business Insider:
 Zero Hedge:
 CNBC:
  • Oil Boom to Create Jobs: SandRidge Energy(SD) CEO. “There’s been a renaissance in production in not only Canada but the United States just recently,” he said. “In the next three years, we believe our industry will be creating over 100,000 jobs just in Kansas and Oklahoma.”

IBD:

Washington Post:
  • Intelligence Community Can Keep Data On Americans With No Ties To Terrorism For Up To 5 Years. The U.S. intelligence community will now be able to store information about Americans with no ties to terrorism for up to five years under new Obama administration guidelines. Until now, the National Counterterrorism Center had to immediately destroy information about Americans that was already stored in other government databases when there were no clear ties to terrorism.
Detroit Free Press:
  • Detroit's Credit Rating Downgraded by Second Agency. Another blow came to Detroit fiscal health today as a second bond rating agency downgraded the city’s credit rating. Fitch Ratings cited the potential for the city to run out of cash and “a lack of progress in resolving an acute situation” as reasons for the downgrade. “The downgrade and maintenance…are based on delays in implementation of actions at the city and state level that might avert a fiscal crisis for the city,” the Fitch report said. “Fitch sees no assurance that the considerable hurdles to implementing urgently needed changes in the city's financial profile will abate.”
Reuters:
  • Exclusive: UAW Steps Up Bid To Organize VW U.S. Plant: Sources. The United Auto Workers union is soliciting signatures of support from workers at Volkswagen AG's U.S. factory, an escalation of its effort to establish a foothold outside the Detroit automakers. In early March, the UAW started passing out authorization cards for workers to sign in an early formal step needed for union representation, workers at the factory in Chattanooga, Tennessee, told Reuters. UAW President Bob King has said organizing U.S. plants run by foreign automakers, known in the industry as transplants, is crucial for the union's survival. After three decades of declining membership, the UAW faces a financial crunch that has been exacerbated by the U.S. economic downturn. This has forced America's richest union to sell assets and dip into its strike fund to pay for activities.
  • Nike(NKE) Sees Strong Demand, Better Margins in Spring. Nike Inc headed into the spring quarter with strong demand and improving margin trends, as the top sporstwear retailer forecast a strong year with plans to cash in on the Olympics. The Beaverton, Oregon-based company saw futures orders for delivery from March through July rise 15 percent even as rival Adidas expects a slowdown in sales growth in 2012.
  • Micron(MU) Posts Mixed Results as Low Chip Prices Weigh. Micron Technology posted mixed quarterly results, and investors pushed its shares lower after the company said persistently low prices for its memory chips had yet to recover. The slide into bankruptcy of Japanese DRAM chipmaker Elpida in February has created expectations that chipmakers' pricing power, diminished by oversupply, will bounce back this year. But Micron said DRAM prices had yet to rise and that prices for NAND had fallen compared with the prior quarter. In after-hours trade, its shares were down 3.2 percent at $8.43, after having closed at $8.71 on the Nasdaq.
  • Clinton to Let Military Aid to Egypt Continue: State Department Official. Secretary of State Hillary Clinton will allow U.S. military aid to Egypt to continue despite Cairo's failure to meet pro-democracy conditions, a senior State Department official said on Thursday, a move sharply criticized on Capitol Hill. The office of Senator Patrick Leahy, who chairs the Senate subcommittee on foreign aid, revealed Clinton's decision and made clear his deep unhappiness with it, arguing that Clinton should now limit the amount of military aid that is released. Clinton should "release no more taxpayer funds than is demonstrably necessary, withholding the rest in the (U.S.) Treasury pending further progress in the transition to democracy" in Egypt, Leahy said in a statement. Congress has approved $1.3 billion in military aid to Egypt - the same level the country has received for years - for the current fiscal year, which ends on September 30. Congress also approved $250 million in economic aid and up to $60 million for an "enterprise fund."
  • Weak Recovery, Job Cuts Seen Ahead Of French Election. France will see a slow economic recovery and unemployment will keep rising until the middle of the year, national statistics agency INSEE said on Thursday, less than five weeks from a presidential election.
Irish Times:
  • Spain's Borrowing Costs Up Amid Fresh Deficit Fears. SPAIN’S BORROWING costs rose above 5.5 per cent for the first time since January as investors fretted about another escalation of the euro zone crisis amid signs of further economic weakening even in Germany. Investors, already nervous about Madrid’s deficit and weak growth prospects, pushed Spain’s benchmark 10-year bond yields up 14 basis points (bp) to as high as 5.53 per cent. Italy’s borrowing costs also rose with the yield on its 10-year bond breaking through 5 per cent. Markets have been calmed in recent weeks by the European Central Bank’s cheap loans for lenders, known as the longer-term refinancing operation. But investors are becoming nervous that the impact of the two LTROs is wearing off. Marc Chandler, currency strategist at Brown Brothers Harriman, noted that Italian 10-year yields have fallen 180bp so far this year while Spain’s have risen 39bp. “That is after two LTROs,” he said. “That definitely concerns me. When the bonds rally it helps the banks’ balance sheets. But when yields start rising it hurts the banks even more. It is a vicious circle.”
Globe and Mail:
  • Canada's Mortgage Body Moves To Slow Booming Housing Market. Canada Mortgage and Housing Corp. has signalled it will dramatically curtail its growth in the mortgage market in the coming years in an effort to cool Canada’s sizzling housing sector. Documents released by the Crown corporation this week show CMHC expects to increase mortgage insurance over the next few years at only a fraction of the pace seen recently.

Japan Times:
  • Fear of Radiation Creeping South. Some parents with young kids relocating from Tokyo area. Lingering concerns about radiation a year into the Fukushima nuclear crisis have prompted people even as far away as the Tokyo area, some 100 to 250 km from the Fukushima No. 1 power plant, to move away.

Economic Information Daily:
  • Guangzhou, Shenzhen May Start Property Tax Trial. The Chinese cities of Guangzhou and Shenzhen may follow Chongqing and Shanghai to start property tax trials, citing Jia Kang, head of the Finance Ministry's research institute for fiscal science, and Wang Haibin, an analyst at Shenzhen World Union Properties Consultancy Co. Property tax trials should be widened to target existing home owners, they said.
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -1.0% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 154.50 +1.5 basis points.
  • Asia Pacific Sovereign CDS Index 118.50 +5.0 basis points.
  • FTSE-100 futures +.39%.
  • S&P 500 futures +.16%.
  • NASDAQ 100 futures +.20%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (DRI)/1.23
  • (KBH)/-.23
Economic Releases
10:00 am EST
  • New Home Sales for February are estimated to rise to 325K versus 321K in January.

Upcoming Splits

  • None of note

Other Potential Market Movers

  • The Fed's Bernanke speaking, Fed's Lockhart speaking and the (HLF) analyst day 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 mixed. The Portfolio is 75% net long heading into the day.
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Thursday, March 22, 2012

Stocks Falling into Final Hour on Rising Eurozone Debt Angst, Rising Global Growth Fears, Profit-Taking, More Shorting

Posted by Gary .....at 4:12 PM

Broad Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 16.16 +6.81%
  • ISE Sentiment Index 61.0 -46.49%
  • Total Put/Call 1.14 +16.33%
  • NYSE Arms 2.09 +74.03%
Credit Investor Angst:
  • North American Investment Grade CDS Index 89.21 +3.55%
  • European Financial Sector CDS Index 156.55 +10.84%
  • Western Europe Sovereign Debt CDS Index 227.99 -.75%
  • Emerging Market CDS Index 239.20 +4.0%
  • 2-Year Swap Spread 26.75 -.25 basis point
  • TED Spread 41.25 +2.5 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -53.0 +.75 bp
Economic Gauges:
  • 3-Month T-Bill Yield .07% -2 basis points
  • Yield Curve 191.0 -1 basis point
  • China Import Iron Ore Spot $145.20/Metric Tonne +.21%
  • Citi US Economic Surprise Index 29.0 -.6 point
  • 10-Year TIPS Spread 2.38 -2 basis points
Overseas Futures:
  • Nikkei Futures: Indicating a -187 open in Japan
  • DAX Futures: Indicating a -5 open in Germany
Portfolio:
  • Slightly Lower: On losses in my Tech and Retail sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short, then covered some of them
  • Market Exposure: 75% Net Long
BOTTOM LINE: Today's overall market action is mildly bearish, as the S&P 500 trades lower on rising Eurozone debt angst, high energy prices, profit-taking, more shorting and rising global growth fears. On the positive side, Computer Service, Utility and Restaurant shares are slightly higher on the day. Technology shares are holding up relatively well. Oil is falling -1.2% and Gold is down -.4%. On the negative side, Coal, Oil Tanker, Energy, Oil Service, Steel, Homebuilding and Road & Rail shares are under significant pressure, falling more than -2.5%. Small-caps and the Transports are also underperforming. Lumber is down -.9% and Copper is down -1.9%. Major European indices fell around -1.5%, led by a -1.7% decline in Italy. The Bloomberg European Financial Services/Bank Index is fell -1.9%. The France sovereign cds is up +4.74% to 175.12 bps, the Spain sovereign cds is rising +2.07% to 432.34 bps, the Germany sovereign cds is rising +4.5% to 73.50 bps, the Russia sovereign cds jumped +4.68% to 174.42 bps, the Brazil sovereign cds is up +4.5% to 121.49 bps and the Italy sovereign cds is rising +3.6% to 376.75 bps. Moreover, the European Investment Grade CDS Index is rising +4.1% to 96.33 bps. The Philly Fed ADS Real-Time Business Conditions Index continues to trend lower from its mid-December peak despite investor perceptions that the US economy is accelerating. Lumber is -10.5% since its Dec. 29th high despite the better US economic data, dovish Fed commentary, improving sentiment towards homebuilders, equity rally and decline in eurozone debt angst. Moreover, the weekly MBA Purchase Applications Index has been around the same level since May 2010. The Baltic Dry Index has plunged around -60.0% from its Oct. 14th high and is now down around -45.0% ytd. China Iron Ore Spot has plunged -20.0% since Sept. 7th of last year. Shanghai Copper Inventories are right near a new record and have risen +750.0% ytd. I still think this is more of a red flag for falling demand rather than the intentional hoarding, which many suggest. The most economically sensitive stocks are substantially underperforming today. The blowup in the (TVIX) ETF is a concern for market psychology. One of my longs, market leader (AAPL), isn't trading quite as well of late. The stock weakened into the afternoon for the second day in a row. I suspect we could see some more equity profit-taking/new shorting into quarter-end, given the big move higher in the major averages. For the recent equity advance to maintain traction, I would still expect to see further European credit gauge improvement, a further subsiding of hard-landing fears in key emerging markets, a rising 10-year yield, better volume, stable-to-lower energy prices and higher-quality stock market leadership. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, more tech sector optimism and investor performance angst.
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Today's Headlines

Posted by Gary .....at 3:03 PM

Bloomberg:
  • Euro-Area Services, Manufacturing Contracted in March: Economy. Euro-area services and manufacturing output contracted more than economists forecast in March, adding to signs the economy has slipped into recession. A euro-area composite index based on a survey of purchasing managers in both industries dropped to 48.7 from 49.3 in February, London-based Markit Economics said in an initial estimate today. Economists forecast a gain to 49.6, according to the median of 21 estimates in a Bloomberg News survey. A reading below 50 indicates contraction. Europe's economy may struggle to regain strength after shrinking 0.3 percent in the fourth quarter as governments toughen budget cuts, rising oil prices erode consumers' purchasing power and global demand weakens. "Today's figures clearly show that the recession in the euro zone is far from over," said Peter Vanden Houte, an economist at ING Group in Brussels. "This increases the danger that the debt crisis could come back with vengeance" by making it more difficult for governments to cut budget deficits.
  • Italy, Spain Too Big for Firewall to Save, Schaeuble Aid Says. Italy and Spain would be "too big to be saved" by the euro-area's financial backstop and debate should focus on the firewall's quality rather than its size, German Finance Ministry official Ludger Schuknecht said. Ideas "floating around" to boost Europe's defenses against the debt crisis aren't "the ideas that the mega- firewall fans might like," Schuknecht, who heads the ministry's department of fiscal policy, international finance and monetary policy, said at a Bloomberg Link Sovereign Debt Conference in Frankfurt today. "Italy and Spain are too big to be saved by these kind of numbers that we are putting into the window," he said. Making the firewall credible to markets "is much more important than talking about big numbers that are afterwards just a show."
  • Sovereign, Corporate Bond Risk Rises on Slowing Growth Concern. Credit-default swaps insuring government and company debt rose after a contraction in manufacturing in Europe and China triggered concern the global economy will slow. The Markit iTraxx SovX Western Europe Index of swaps on 15 governments jumped 10 basis points to 280, according to BNP Paribas SA prices at 10:41 a.m. in London. The Markit iTraxx Crossover Index of credit-default swaps linked to 50 companies with mostly high-yield credit ratings increased 20.5 basis points to 590.5. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings advanced 2.25 basis points to 116.25 basis points. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 13 basis points to 203 and the subordinated index jumped 14.5 to 326.5, BNP Paribas data show.
  • S&P’s Kraemer Says Italy Risks Are Main Focus for Policy Makers. Standard & Poor’s analyst Moritz Kraemer said Italy is the country most under scrutiny by policy makers as its financing needs are larger than the support available from Europe’s crisis-fighting resources. “The country that is most in the eye of the attention of policy makers has to be Italy,” Kraemer said at the Sovereign Debt Conference hosted by Bloomberg Link in Frankfurt today. That is “simply because of its very large financing requirements” which are, “with the current toolbox of safety nets that we have in Europe, beyond credible support."
  • China Requires Lawyers to Swear Their Loyalty to Communist Party. China’s Ministry of Justice ordered lawyers who have just obtained or renewed a legal license to take an oath declaring their support for the leadership of the ruling Chinese Communist Party. The ministry said lawyers are required to take such an oath within three months of receiving their certificates, according to a statement posted on the ministry’s website yesterday. Lawyers are also ordered to “strive for the cause of socialism,” according to the oath. The move takes place amid a push by the party to maintain its control across different sections of society. The party needs to “resolutely oppose all erroneous political tendencies contrary to the party’s basic line,” Vice President Xi Jinping said in a March 1 speech.
  • Crude Declines on Weak Global Manufacturing Data. Oil fell to a one-week low after manufacturing in the euro area and China contracted this month, signaling that fuel consumption may decline. Futures dropped as much as 2.6 percent as services and output slipped more than forecast in Europe, according to London-based Markit Economics. Crude oil for May delivery fell $2.34, or 2.2 percent, to $104.93 a barrel at 12:26 p.m. on the New York Mercantile Exchange. The contract touched $104.50, the lowest level since March 15. Prices are 6.2 percent higher this year. Brent oil for May settlement declined $1.62, or 1.3 percent, to $122.58 a barrel on the London-based ICE Futures Europe exchange.
  • Copper Drops as China Manufacturing May Contract: Shanghai Mover. Copper declined to the lowest in almost two weeks after a preliminary report showed manufacturing in China, the biggest consumer, may contract for a fifth month, eroding demand prospects amid high local stockpiles. Three-month copper fell as much as 1.1 percent to $8,365.50 a metric ton, the lowest level since March 9, on the London Metal Exchange and traded at $8,379 by 3:58 p.m. Tokyo time. “With swelling stockpiles at bonded and exchange warehouses in China, the PMI data has confirmed a slowdown in the country’s economic growth,” said Chae Un Soo, a metals trader at Korea Exchange Bank (004940) Futures Co. in Seoul. Stockpiles tallied by the Shanghai Futures Exchange climbed to 227,276 tons last week, almost four times as much as the beginning of December. Bonded warehouse inventories in Shanghai were at 530,000 tons last week, a Bloomberg News survey showed.
Wall Street Journal:
  • FedEx(FDX) Says Economy Isn't As Robust As It Hoped. FedEx says the U.S. and global economies aren't growing as strongly as expected. It expects a mild recession in Europe this year. That outlook on a conference call with analysts overshadowed a strong third quarter for the Memphis, Tenn., company. Online holiday sales helped FedEx more than double its profit in the three-month period ended in February. The world's second-largest package delivery company is predicting growth of 2.1 percent in the U.S., compared with a forecast of 2.5 percent growth by leading economists surveyed by The Associated Press. It dropped its forecast for global growth to 2.3 percent from 2.9 percent.
  • March, April to Determine How Soon U.S. Hit Debt Ceiling. The U.S. government is projected to hit the $16.394 trillion debt ceiling sometime later this year, but how quickly we get there depends in large part on how things shape up in March and April.
MarketWatch:
CNBC.com:
  • 'Worst Still to Come' for Europe: Citi Economist. Despite high-profile measures such as the Greek debt deal and mass pumping of liquidity into the banking system, Europe’s problems have merely been delayed for another day, Willem Buiter, chief economist at Citi, told CNBC.
Business Insider:
 Zero Hedge:
Seeking Alpha:

Reuters:

  • Fed's Fisher Sees No Need for More Monetary Easing. The U.S. economy is in much better shape and does not need further help from the central bank, a top Federal Reserve official known for his hawkish policy views said on Thursday. Although growth is "slower than we would like," Dallas Fed President Richard Fisher told Fox Business Network, "it's gaining momentum." "We will not support further quantitative easing under these circumstances because there's a lot of money lying on the sidelines, lying fallow," he said according to a transcript provided by the network. "We don't need any more monetary morphine."
  • U.S. Miners, Steel Shares Drop on China Slowdown. Shares in U.S. steelmakers and coal and metal miners dropped on Thursday on signs that industrial growth was slowing in China, a big consumer of metal and raw materials for its economic building.

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