U.S. Week Ahead by MarketWatch (video).
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week mixed as rising global growth fears, Eurozone debt angst and technical selling offsets global central banks stimulus hopes, lower energy prices and bargain-hunting. My intermediate-term trading indicators are giving mostly bearish signals and the Portfolio is 50% net long heading into the week.
Sunday, June 17, 2012
Friday, June 15, 2012
Weekly Scoreboard*
Indices
- S&P 500 1,342.84 +1.3%
- DJIA 12,767.10 +1.7%
- NASDAQ 2,872.80 +.5%
- Russell 2000 771.32 +.28%
- Value Line Geometric(broad market) 336.26 -.02%
- Russell 1000 Growth 627.70 +.66%
- Russell 1000 Value 658.90 +1.50%
- Morgan Stanley Consumer 786.71 +1.22%
- Morgan Stanley Cyclical 907.65 -.03%
- Morgan Stanley Technology 634.42 +.11%
- Transports 5,091.24 +.58%
- Utilities 483.05 +.96%
- Bloomberg European Bank/Financial Services 71.81 +2.13%
- MSCI Emerging Markets 38.61 +1.99%
- Lyxor L/S Equity Long Bias 992.97 +1.28%
- Lyxor L/S Equity Variable Bias 800.02 +.10%
- Lyxor L/S Equity Short Bias 539.27 unch.
- NYSE Cumulative A/D Line 140,250 +.7%
- Bloomberg New Highs-Lows Index -202 -156
- Bloomberg Crude Oil % Bulls 38.0 +5.6%
- CFTC Oil Net Speculative Position 130,858 -10.88%
- CFTC Oil Total Open Interest 1,458,395 +.12%
- Total Put/Call 1.0 +5.26%
- OEX Put/Call .94 -23.58%
- ISE Sentiment 118.0 -11.28%
- NYSE Arms .58 -38.95%
- Volatility(VIX) 21.11 -.57%
- S&P 500 Implied Correlation 70.32 +2.73%
- G7 Currency Volatility (VXY) 10.97 -1.26%
- Smart Money Flow Index 11,071.23 +1.33%
- Money Mkt Mutual Fund Assets $2.554 Trillion -.4%
- AAII % Bulls 34.04 +24.0%
- AAII % Bears 35.79 -21.8%
- CRB Index 272.23 -.24%
- Crude Oil 84.03 -.36%
- Reformulated Gasoline 270.17 +34%
- Natural Gas 2.47 +7.03%
- Heating Oil 264.65 -1.22%
- Gold 1,628.10 +2.07%
- Bloomberg Base Metals Index 198.38 +1.92%
- Copper 339.05 +1.97%
- US No. 1 Heavy Melt Scrap Steel 399.0 USD/Ton unch.
- China Iron Ore Spot 135.0 USD/Ton +2.74%
- Lumber 268.10 -5.57%
- UBS-Bloomberg Agriculture 1,406.83 -2.35%
- ECRI Weekly Leading Economic Index Growth Rate -3.0% -100 basis points
- Philly Fed ADS Real-Time Business Conditions Index -.2160 +4.51%
- S&P 500 Blended Forward 12 Months Mean EPS Estimate 111.09 +.14%
- Citi US Economic Surprise Index -60.60 -10.5 points
- Fed Fund Futures imply 66.0% chance of no change, 34.0% chance of 25 basis point cut on 6/20
- US Dollar Index 81.63 -.98%
- Yield Curve 130.0 -7 basis points
- 10-Year US Treasury Yield 1.58% -6 basis points
- Federal Reserve's Balance Sheet $2.852 Trillion +.61%
- U.S. Sovereign Debt Credit Default Swap 48.40 +1.90%
- Illinois Municipal Debt Credit Default Swap 228.0 -4.22%
- Western Europe Sovereign Debt Credit Default Swap Index 316.11 -1.68%
- Emerging Markets Sovereign Debt CDS Index 306.75 -6.19%
- Saudi Sovereign Debt Credit Default Swap 130.35 -.97%
- Iraq Sovereign Debt Credit Default Swap 449.99 -3.94%
- China Blended Corporate Spread Index 560.0 -19 basis points
- 10-Year TIPS Spread 2.12% -2 basis points
- TED Spread 38.25 -1.0 basis point
- 2-Year Swap Spread 27.75 -3.5 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -50.25 +1.5 basis points
- N. America Investment Grade Credit Default Swap Index 119.61 -2.43%
- Euro Financial Sector Credit Default Swap Index 279.01 -.28%
- Emerging Markets Credit Default Swap Index 286.07 -5.98%
- CMBS Super Senior AAA 10-Year Treasury Spread 204.0 unch.
- M1 Money Supply $2.243 Trillion +.38%
- Commercial Paper Outstanding 1,007.1 -.70%
- 4-Week Moving Average of Jobless Claims 382,000 +4,200
- Continuing Claims Unemployment Rate 2.6% unch.
- Average 30-Year Mortgage Rate 3.71% +4 basis points
- Weekly Mortgage Applications 949.40 +17.97%
- Bloomberg Consumer Comfort -36.4 +1.2 points
- Weekly Retail Sales +2.5% -60 basis points
- Nationwide Gas $3.52/gallon -.04/gallon
- U.S. Cooling Demand Next 7 Days 14.0% above normal
- Baltic Dry Index 924.0 +5.36%
- Oil Tanker Rate(Arabian Gulf to U.S. Gulf Coast) 30.0 -7.69%
- Rail Freight Carloads 246,422 +15.2%
- Large-Cap Value +1.50%
- Mid-Cap Value +.10%
- Road & Rail +3.76%
- Tobacco +3.58%
- Banks +2.54%
- Telecom +2.46%
- Alternative Energy +2.45%
- Computer Hardware -1.13%
- Coal -1.86%
- HMOs -2.67%
- Oil Tankers -3.76%
- Education -5.02%
- FLDM, QSFT, PRGS, SKX, NAV and LMNX
- CTCT, TFM, HAR, AEGR, SMG, STJ, CASY, FDS and CNC
ETFs
Stocks
*5-Day Change
Stocks Rising into Final Hour on Global Central Bank Stimulus Hopes, Short-Covering, Euro Bounce, Tech/Financial Sector Strength
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Volume: Below Average
- Market Leading Stocks: Underperforming
- VIX 22.14 +2.17%
- ISE Sentiment Index 117.0 -18.75%
- Total Put/Call 1.04 +.97%
- NYSE Arms .58 -2.12%
- North American Investment Grade CDS Index 118.27 -1.84%
- European Financial Sector CDS Index 278.94 -2.46%
- Western Europe Sovereign Debt CDS Index 317.37 -1.49%
- Emerging Market CDS Index 286.37 -.36%
- 2-Year Swap Spread 27.75 -2.25 basis points
- TED Spread 38.25 +1.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -50.25 +3.75 basis point
- 3-Month T-Bill Yield .09% -1 basis point
- Yield Curve 131.0 -2 basis points
- China Import Iron Ore Spot $135.0/Metric Tonne +.22%
- Citi US Economic Surprise Index -60.60 -6.1 points
- 10-Year TIPS Spread 2.13 +3 basis points
- Nikkei Futures: Indicating a +59 open in Japan
- DAX Futures: Indicating +15 open in Germany
- Higher: On gains in my tech, medial, retail and biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
- Market Exposure: 50% Net Long
Today's Headlines
Bloomberg:
- Monti's Backers Slide in Polls Signals Risk for Fiscal Rigor. The four main political parties backing Prime Minister Mario Monti’s unelected government fell below 50 percent for the first time in an opinion poll, with support surging for an anti-austerity bloc. The 5 Star Movement, whose leader, comic-turned-politician Beppe Grillo, says the nation may need to restructure debt and exit the euro, became Italy’s second-biggest party, a poll by the SWG Institute showed. Monti’s popularity fell to an all-time low of 33 percent, less than half the level when he was appointed in November, SWG said. Italy, the bearer of the euro’s second-largest public debt, must have “budget discipline as a travel mate” in the future, Monti said in Parliament on June 13. Monti passed a 20 billion- euro ($32 billion) austerity plan in January that aimed to bring the budget deficit within the European Union limit this year. The measures contributed to pushing the economy into its fourth recession since 2001, with unemployment now topping 10 percent. The Democratic Party, Silvio Berlusconi’s People of Liberty, the Union of Centrists, and the Future and Liberty Party, the main parties backing Monti, hold more than two thirds of the seats in Parliament and have faced a decline in support since the start of his government in November. SWG said the four are currently polling at 48.5 percent.
- Obama Heads to G-20 With Few Tools To Stem Euro Debt Crisis. Europe’s sovereign debt crisis, which Obama has called the “cloud” hanging over the U.S. economy, will be the central topic for the Group of 20 nations summit next week in Los Cabos, Mexico. Yet U.S. officials said they don’t expect the meeting to result in significant progress toward a resolution. The G-20 meets June 18-19, one day after Greek elections that may determine that country’s future in the euro region and as global markets look to Europe’s leaders for clearer signs of how they move forward.
- ECB Deposit Rate of 0% Said To Be No Bar To Lower Benchmark. European Central Bank policy makers have overcome a key concern about taking the benchmark interest rate below 1 percent, two euro-area central bank officials said. The likelihood that such a move would also involve cutting the rate the ECB pays banks on overnight deposits from 0.25 percent is no longer an obstacle for a majority of the Governing Council, said the officials, who spoke on condition of anonymity because the deliberations aren’t public. The deposit rate traditionally moves in tandem with the benchmark and policy makers have been reluctant to take it to zero out of concern it would discourage interbank lending. A rate cut isn’t certain, the officials said. An ECB spokeswoman declined to comment.
- Central Banks Warn Euro Debt Stress Threatens World. Central banks intensified warnings that Europe’s failure to tame its debt crisis threatens to roil the world’s financial markets and economy as Greece’s election in two days looms as the next flashpoint for investors. Monetary policy makers from the U.K. to Japan and Canada sounded the alert about potential fallout from the single currency bloc’s troubles.
- Greek Vote Outcomes Range From Coalition to Euro Exit: Scenarios. Below are some frequently asked- questions on Greece’s elections on June 17 and a list of some possible outcomes after the vote.
- ECB's Asset-Backed Bond Project Is Boycotted By Dutch Banks. A Dutch financial services lobby group said its members are boycotting a European Central Bank project to improve transparency in the 1.9 trillion-euro ($2.4 trillion) asset-backed securities market. Robin Fransman, a director at the Holland Financial Centre in Amsterdam, said a commercial company shouldn’t have been chosen to run the initiative. Dutch banks are the euro region’s biggest sellers of asset-backed securities, according to data compiled by JPMorgan Chase & Co.
- Payrolls Fall in 18 States, Climb in 27. Payrolls increased in 27 states in May, while the unemployment rate climbed in 18, indicating progress in the U.S. labor market remains uneven.
- Consumer Sentiment Gauge Declines to '12 Low. Confidence among U.S. consumers declined in June to the lowest level this year as the labor market showed few signs of improving. The Thomson Reuters/University of Michigan index of consumer sentiment fell in June to 74.1 from 79.3 the prior month, which was the highest since October 2007. The gauge was projected to fall to 77.5, according to a median forecast of 66 economists surveyed by Bloomberg News. A pace of job growth that’s slowed for four straight months and wage gains that are failing to keep pace with inflation are offsetting cheaper prices at the gas pump. At the same time, households may be feeling less wealthy as Europe’s debt crisis roils share prices, raising the risk that consumer spending will stagnate. The Michigan survey’s index of current conditions asks Americans whether they’re better off than they were a year ago and if they think it’s a good time to buy big-ticket items like cars. In June that measure eased to 82.1 from 87.2. The index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, decreased to 68.9, also the lowest this year, from 74.3, which was the highest since July 2007. Over the next five years, the figures tracked by Fed policy makers, Americans expected a 2.9 percent rate of inflation this month compared with 2.7 percent in May.
- U.S. Industrial Production Unexpectedly Fell .1% in May. Industrial production in the U.S. unexpectedly fell in May for the second time in three months as factories turned out fewer vehicles and consumer goods. Output at factories, mines and utilities decreased 0.1 percent last month after a revised 1 percent gain in April, the Federal Reserve reported today in Washington. Economists forecast a 0.1 percent advance, according to the Bloomberg News survey median. Manufacturing, which makes up about 75 percent of total production, dropped 0.4 percent last month.
- Potash May ending inventory up ~113k mt M/m, back above 3m mt and 43% above 5-yr avg.; data released last night on Potash Corp. website via The Fertilizer Institute. Exposure to potash(as % of 2011 revenue): (IPI) 89%, (POT) 46%, K+S 41%, (MOS) 31%. (POT) and (CF) present at RBC Global Mining & Materials Conf. next week.
- Rajat Gupta Convicted of Insider Trading by U.S. Jury. Rajat Gupta, who reached the pinnacle of corporate America as managing partner of McKinsey & Co. and as a director at Goldman Sachs Group Inc. and Procter & Gamble Co. (PG), was convicted by a federal jury of leaking inside information to hedge-fund manager Raj Rajaratnam. Gupta, 63, was found guilty of securities fraud and conspiracy by a federal jury in Manhattan today in its second day of deliberations. Securities fraud carries a maximum prison sentence of 20 years, and conspiracy carries a five-year maximum. Gupta will remain free on bail until his sentencing on Oct. 18.
- Banks With High Derivatives Concentration May Be Too-Big-to-Fail. Regulators will probably view six banks with 75% of the U.S.'s derivatives assets and liabilities as too-big-to-fail, according to a Fitch Ratings analyst. A Fitch study released last week found that three-fourths of derivatives assets and liabilities among 100 big U.S. firms reside in six banks - Bank of America(BAC), Citigroup(C), Goldman Sachs(GS), JPMorgan(JPM), Morgan Stanley(MS) and Wells Fargo(WFC). The report is the first to quantify how derivatives are concentrated across all sectors.
- Oil Falls on Concern That Economy is Slowing. Oil fell on concern a slowing U.S. economy will reduce demand for oil. Futures dropped as much as 0.6 percent as data showed U.S. industrial production unexpectedly fell in May and confidence among U.S. consumers declined in June to the lowest level this year. Greek elections June 17 may determine whether the country remains in the euro bloc. The Federal Reserve starts a two-day meeting June 19. “On the economic front, the numbers are just bad and crude could get down even below the $80 mark,” said Tariq Zahir, a New York-based commodity fund manager at Tyche Capital Advisors. “People are trying to position themselves for the Greek elections and the Fed meeting.” Crude for July delivery slid 30 cents, or 0.4 percent, to $83.61 a barrel at 12:37 p.m. on the New York Mercantile Exchange. The contract climbed to $84.80 earlier. Prices are down 0.6 percent this week and 15 percent this year. Brent oil for August settlement rose 8 cents to $97.25 a barrel on the London-based ICE Futures Europe exchange.
- Gold Traders Bullish as Hedge Funds Increase Wagers. Twenty-four analysts surveyed by Bloomberg said they expect gold to gain next week and six were bearish. A further three were neutral. Speculators boosted net-long positions by 27 percent in the week ended June 5, the latest Commodity Futures Trading Commission data show. ETP holdings rose 21.07 metric tons valued at $1.03 billion since the start of June, halting a three-month retreat, according to data compiled by Bloomberg.
- U.S. To Stop Deporting Some Illegal Immigrants. The Obama administration said it wouldn't deport many younger illegal immigrants who came to the U.S. as children, a major shift in the middle of an election season where the Hispanic vote could be pivotal. The new rules, sidestepping Congress after years of stalemate over an immigration overhaul, came in response to frequent pleas by Hispanic and other groups for more lenient treatment of people who came to the U.S. illegally as youngsters. The move quickly drew criticism from those who want a tougher stance on illegal immigration and oppose what they call amnesty. The new rules apply to people who came to the U.S. under the age of 16, haven't committed a major crime and are currently under 30. They will be eligible for a two-year period of "deferred action," where they could apply for work permits and wouldn't be deported.
- Risking Risks Threaten Recovery. The U.S. economy is losing momentum just as global events are threatening a create new shocks to the system. New data this week provided more evidence that the economic recovery is sputtering for the third year in a row. Layoffs are rising, factory output is falling and consumers are cutting spending amid rising uncertainty. Moreover, those warning signs mostly predate the worst of the recent turmoil in Europe, which has hit financial markets and hurt demand for American products overseas.
- Egypt's Muslim Brotherhood Pins Hopes on Vote. With security beefed up on the eve of Egypt's presidential runoff election, the Muslim Brotherhood tried to salvage its hopes for leadership urging voters to back its candidate instead of calling for mass protests.
Fox News:
- EPA Proposes Stricter Standards for Soot Pollution. The move by the Environmental Protection Agency won immediate support from environmental groups and public health advocates, who said the EPA was protecting millions of Americans at risk of soot-related asthma attacks, lung cancer, heart disease and premature death. But congressional Republicans and industry officials called the proposal overly strict and said it could hurt economic growth and cause job losses in areas where pollution levels are determined to be too high. "EPA's proposal could substantially increase costs to states, municipalities, businesses and ultimately consumers without justified benefits," said Howard Feldman, director of regulatory and scientific affairs for the American Petroleum Institute, the top lobbying group for the oil and gas industry. Feldman said the rule could discourage economic investment in counties that fail to meet new federal standards, including in political swing states such as Ohio and Pennsylvania, where a natural gas drilling boom has boosted the local economies. "Non-attainment means non-investment" by industry, Feldman said.
CNBC.com:
- Merkel Takes Swipe at France as Tensions Grow. Germany's Angela Merkel criticized France's economic performance on Friday in a growing war of words with its new Socialist President Francois Hollande over how to tackle Europe's deepening debt crisis. Describing her own country as Europe's "stabilizing anchor and growth engine", the center-right chancellor told German business leaders that Europe should talk about the growing gap between the bloc's two biggest economies and traditional allies. Tension has risen so much that French Prime Minister Jean-Marc Ayrault felt moved to deny that his country was trying to form a united front with Italy and Spain against Merkel and her drive for austerity in the single currency zone. But Merkel, possibly irritated by Hollande's meeting with German center-left opposition leaders earlier this week on euro zone policy, took what looked like a swipe at his expansive policy ideas such as a new decree partially lowering the pension age, which was part of his election campaign. "If you look for instance at the development of unit labor costs between Germany and France in the past 10 years, then you see that at the start of the millennium Germany looked rather worse or at best as good as our neighbor in a lot of factors, while the differences have now been growing a lot more strongly, also a topic that must be discussed in Europe, naturally," she said.
- Forthcoming Facebook(FB) Motion Said to Discuss Nasdaq's(NDAQ) Role in IPO.
- Traders Are Betting That These 14 Banks Will Default.
- DOWNGRADE-MAGEDDON 2012: Here Are The Gigantic Banks On Moody's Chopping Block.
- JC Penney(JCP) Rebranding Is Driving Its Core Customers AWAY From The Store.
- This New Drone Will Radically Enhance Navy Surveillance Capabilities.
- Spain Bond Drubbing Continues as Stocks Surge. (graph)
- On The Keynesian Lunacy of Targeting Outcomes.
- The Greek Decision Has Grown Spanish Branches.
- Q1 Hedge Fund Launches Total 304. The first quarter of 2012 saw the launch of 304 hedge funds as industry assets hit a record $2.13 trillion, according to Hedge Fund Research. On the flip side, hedge fund closures were also up in Q1, at 232; the highest liquidation rate since Q1 2010, when 240 funds closed. More funds of hedge funds closed than opened in Q1 2012, according to HFR, with 64 closing compared to 34 launching. The quarter was the fourth consecutive in which the number of funds of funds declined.
Gallup:
Reuters:
- Bundesbanker says no more leeway for Spanish banks. The European Central Bank will not give Spanish banks more leeway to access its funding operations, a Bundesbank board member said, warning that Sunday's election in Greece may not herald the clarity some in the market are hoping for. The European debt crisis may reach new heights next week as Greek elections on Sunday could bring to power the SYRIZA party which rejects EU/IMF bailout program terms, while Spain is on the verge of requesting international aid for its teetering banks. "Regardless of the election outcome on Sunday, it will need to be decided quickly whether Greece's second bailout program is on track or whether the new government will get it back on track," Bundesbank board member Joachim Nagel told Reuters. "Uncertainty will continue as long as there is no reliable prospect for how things will progress in Greece," he said, adding that Greek risks would be manageable for German banks. Nagel chose a football analogy to get his point across: "The ball is now in the politicians' half and is getting closer to the goal line."
- NY Fed: Manufacturing Growth Slowest Since November 2011. A gauge of manufacturing in New York state fell sharply in June to its lowest level since November 2011 but still showed growth, the New York Federal Reserve said in a report on Friday. The New York Fed's "Empire State" general business conditions index fell to 2.3, a 15-point drop from the month before and the lowest level since November 2011, and far below economists' expectations of 13. Employment gauges also dropped, and indexes for the six-month outlook fell for the fifth consecutive month to 23.1, suggesting waning optimism about the medium-term. The shipments index dropped 19 points to 4.8, and the prices paid and new orders indexes also fell to their lowest levels since November 2011.
- S&P Against Rings Alarm Bells on US Refinancing Wall. Standard & Poor's again sounded the alarm bells about an impending wall of refinancing for US companies in the next four years, this time highlighting the potential stress for financial and speculative-grade companies. S&P said US corporate issuers had around $1.38 trillion of debt maturing through year-end 2013, and warned that the greatest refinancing risk was within the Single B and Triple C categories from 2013 through 2016.
Telegraph:
- Gordon Brown: France and Italy May Need a Bail-Out. Gordon Brown: France and Italy may need a bail-out. Gordon Brown has warned the euro is reaching its "day of reckoning" and suggested France and Italy would follow Spain in needing a bail-out as the eurozone crisis deepens.
- IMF Urges Europe to Help Refinance Irish Bank Bail-Out. The International Monetary Fund on Friday urged Europe to help Ireland refinance its crippling bank bailout and consider taking equity in state-owned banks to help Dublin return to bond markets and avoid a second bailout next year.
Radio Free Europe Radio Liberty:
- Egypt's Islamists Warn of 'Dangerous Days' After Parliament Dissolved. The Muslim Brotherhood has warned that Egypt faces "dangerous days" ahead, after the Supreme Constitutional Court dissolved the Islamist-dominated parliament. The court ruled on June 14 that last year's elections for the lower house of parliament, the country's first free elections in decades, were unconstitutional.
Caixin:
- The Beijing government recommended companies to raise base wages by 11.5%, citing 2012 salary guidelines published by the local government.
Bear Radar
Style Underperformer:
- Large-Cap Value +.43%
- 1) Airlines -.87% 2) Oil Tankers -.30% 3) Construction -.01%
- IVN, GNC, LUV, RIC, NRG, CPN, TTWO, CHKP, NANO, ERF, IIVI, QCOM, FELE, SHOO, HAYN, ONXX, TRN, TGI, SDT and AIR
- 1) TC 2) GFI 3) FTR 4) MNST 5) NYX
- 1) IIVI 2) TRN 3) LSCC 4) POT 5) GOOG
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