Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Volume: Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- VIX 15.80 -.75%
- ISE Sentiment Index 133.0 +41.5%
- Total Put/Call .84 unch.
- NYSE Arms .60 -.67%
Credit Investor Angst:
- North American Investment Grade CDS Index 101.42 -.72%
- European Financial Sector CDS Index 164.20 +1.03%
- Western Europe Sovereign Debt CDS Index 109.98 bps +.90%
- Emerging Market CDS Index 252.95 bps -1.04%
- 2-Year Swap Spread 12.0 -.5 basis point
- TED Spread 22.0 -1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -27.75 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .09% +1 basis point
- Yield Curve 136.0 -2 basis points
- China Import Iron Ore Spot $117.90/Metric Tonne unch.
- Citi US Economic Surprise Index 47.0 -2.0 points
- 10-Year TIPS Spread 2.39 unch.
Overseas Futures:
- Nikkei Futures: Indicating +52 open in Japan
- DAX Futures: Indicating +37 open in Germany
Portfolio:
- Higher: On gains in my Tech/Medical/Retail/Biotech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- EU Nations Clash on Threshold for Direct ECB Oversight. The European Union is quarreling
over thresholds on how big euro-area lenders must be in order to
be designated for direct oversight by the European Central Bank,
according to draft proposals. Nations are at odds over three different size thresholds,
according to the document drawn up by Cyprus, which holds the
EU’s rotating presidency. Some countries are seeking to set the
bar as low as banks with more than 2.5 billion euros ($3.2
billion) in assets, while others are calling for divisions at
20 billion euros or 60 billion euros, according to the text,
dated Nov. 27 and obtained by Bloomberg News. States are also split over having direct ECB supervision
triggered by a ratio between a bank’s assets and the gross
domestic product of its home country, according to the
proposals, intended to forge a deal on the supervision plan.
- Schaeuble Signals Greece May Need More as Bild Slams Deal. German Finance Minister Wolfgang Schaeuble signaled that Greece may need additional help as the
country’s most-read newspaper slammed a rescue accord as a
“never-ending story” financed by German taxpayers. Euro-area governments may provide additional funding
through the European Union structural fund and further interest-
payment reduction as long as Greece meets all its obligations
under the agreement, Schaeuble wrote in a letter to German
lawmakers obtained by Bloomberg News. Legislators in the lower
house, or Bundestag, will vote on the measure on Nov. 30.
- Emerging Stocks Drop Most in Two Weeks on U.S. Budget Concerns. Emerging-market stocks fell the most
in two weeks on concern that little progress is being made in
U.S. budget talks to avert spending cuts and tax increases that
may send the world’s largest economy into recession. Vale SA, the world’s biggest iron-ore producer, led Brazil
stocks lower. Hankook Tire Worldwide Co. (000240) slid to a four-week low
in Seoul. Citic Securities Co. (6030), China’s biggest-listed
brokerage, sank for the first time in six days as equity trading
slumped in China and the Shanghai Composite Index slid to its
lowest since January 2009. Orascom Construction Industries (OCIC),
Egypt’s biggest publicly traded company, plunged 6.9 percent on
concerns unrest in the country will continue. The MSCI Emerging Markets Index (MXEF) fell 0.8 percent to 988.35
at 10:20 a.m. in New York, and earlier slipped 0.9 percent for
the biggest intraday decline since Nov. 13.
- SAC Said to Get Wells Notice From SEC on Insider Trading.
- American Housing Casino Revives After Big Drop: Mortgages.
- Egypt Protesters Clash With Police in Opposition Test. Egypt’s opposition resolved to stand firm against President Mohamed Mursi and the Muslim Brotherhood, in a showdown over his self-decreed powers that dragged the nation’s top court into the political struggle. Amid renewed clashes between protesters and police in central Cairo, the Supreme Constitutional Court said it was “saddened” when Mursi joined in attacks on its justices. Maher Sami, the court’s deputy chief, denied allegations that it had
been politically motivated when it ruled in June to invalidate
the Islamist-dominated parliament’s lower house.
Wall Street Journal:
Reuters:
- Fitch warns France could be downgraded next year.
Fitch Ratings could strip France of its triple-A credit status next
year if the country fails to meet its targets on debt reduction and its
economy performs worse than forecast, one of the agency's top sovereign
experts warned on Wednesday. "We think it is challenging for France to hit its 3 percent deficit for 2013 particularly given its anemic growth prospects," Tony Stringer, managing director of Fitch's sovereign rating group told Reuters in an interview. "Any
underperformance on either fiscal consolidation or on fundamental
economic reforms could lead to a downgrade in 2013." Fitch currently
expects France's economy to see 0.3 percent growth next year.
- Germans lament 'never-ending story' of Greek aid. German
lawmakers and media accused the government on Wednesday of deceiving
taxpayers over the true costs of saving Greece and said the euro zone
would eventually have to write off much of its Greek debt. The
Bundestag, the lower house of Germany's parliament, is expected to vote
on Friday on the package of measures agreed by euro zone finance
ministers this week which aim to cut Greek debt to 124 percent of gross
domestic product by 2020. The Bundestag's approval is not in doubt but the chorus of
anger and frustration reverberating among German newspapers and
lawmakers highlights the growing political risks for Chancellor
Angela Merkel ahead of next September's federal elections.
- Copper dips on Greek deal uncertainty, U.S. budget talks.
AP:
Financial Times:
- EU power bills ‘triple’ those of US rivals. Concerns
among European companies over the rising gap with US rivals in their
cost of energy is mounting with two leading business groups raising
alarm over the issue. The European Union’s focus on pushing up use of renewable energy has led to sharp increases in energy costs in Europe,
according to a “manufacturing manifesto” drawn up by Orgalime and
Ceemet, two Brussels-based trade associations that represent 200,000
companies across the continent.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Education -1.40% 2) Steel -1.21% 3) Homebuilders -.75%
Stocks Faling on Unusual Volume:
- IOC, REN, SBGI, CBSH, PGI, WAL, KT, CTCM, PBH, TFM, JOSB, MCC, FLT, RLOC, TEA, WTW, MELI, ABMD, VIVO, GIB, IMPV, SHLD, SPW, KBR, GLNG, OKE, MLNX, PFG, MW and CUB
Stocks With Unusual Put Option Activity:
- 1) TOL 2) EMN 3) COST 4) ORCL 5) SKS
Stocks With Most Negative News Mentions:
- 1) ANR 2) GS 3) MLNX 4) APC 5) BTU
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Retail +.82% 2) Coal +.59% 3) Alt Energy +.48%
Stocks Rising on Unusual Volume:
- EXPR, GMCR, GPOR, ANN, COST, AEO, DECK, JCP, PVH and MOV
Stocks With Unusual Call Option Activity:
- 1) KCG 2) AEO 3) COST 4) BAX 5) GMCR
Stocks With Most Positive News Mentions:
- 1) AOL 2) COST 3) WYNN 4) RIG 5) HON
Charts:
Evening Headlines
Bloomberg:
- European Court to Rule Over ECB’s Secret File. A
court will decide tomorrow whether the European Central Bank should
release files on how Greece used derivatives to hide its debt in the
first legal challenge to the authority’s bid to shield its workings from
scrutiny. Bloomberg News sued the ECB in December 2010 to obtain the
documents under European Union freedom-of-information rules. The
papers may illuminate the role the central bank played as Greece
covered up its deficit for almost a decade before seeking a 240
billion-euro ($311 billion) bailout and the biggest debt
restructuring in history.
- U.S. Said to Weigh Tightening Rules for Foreign Lenders. U.S.
units of foreign lenders
including Deutsche Bank AG (DBK) may be required by regulators to comply
with tougher capital rules that some banks sought to skirt, three
people with knowledge of the discussions said. The Federal Reserve,
drafting standards for the nation’s largest banks, may force non-U.S.
firms to house all of their businesses within a U.S. holding company,
said the people, who requested anonymity because the rules haven’t been
completed.
That means local units would have to meet minimum capital
standards regardless of their parents’ resources.
- European Crisis Spurs Drugmakers to Pullback Treatments. The European financial crisis is
creating a tug-of-war between the pharmaceutical industry and
governments as austerity measures from the U.K. to Germany clamp
down on reimbursements, especially for new drugs.
- Hollande Presents Mittal Nationalization Among Options for Site. President Francois Hollande
presented options to ArcelorMittal Chief Executive Officer
Lakshmi Mittal to save jobs at a French plant of the world’s
largest steelmaker, not taking its nationalization off the table. Hollande, who met with Mittal for an hour at the Elysee
presidential palace in Paris yesterday, said in an e-mailed
statement that he asked Mittal to pursue discussions with the
government until the Dec. 1 deadline given to the company to
find a buyer for the site at Florange in north-eastern France.
- Credit Rating Firms in EU to Face Sovereign-Debt Limits. Credit rating companies face curbs
on when they can assess government debt and restrictions on
their ownership under draft plans agreed on by European Union
officials and legislators. Lawmakers from the European Parliament and Cyprus, which
holds the rotating presidency of the EU, also agreed yesterday
to let investors sue ratings companies if they lose money
because of malpractice or gross negligence.
- Argentina Rating Downgraded by Fitch on ‘Probable’ Default. Argentina’s credit rating was cut by
Fitch Ratings, which said a default is probable after a U.S.
judge ruled the country can’t make payments on its restructured
bonds unless it pays holders of defaulted debt by Dec. 15. The rating on Argentina’s international law bonds was
lowered to CC, eight levels below investment grade, from B,
Fitch said today in an e-mailed statement. It cut the rating on
bonds sold under Argentine law to B- from B.
- China’s Stocks Decline to 2009 Low as Trading Activity Decreases.
China’s stocks fell, dragging the benchmark index to its lowest level
since 2009, as trading activity slumped. Materials and industrial
companies led losses. Haitong Securities Co. dropped among brokerages as
regulatory data showed the number of yuan-denominated A-share trading
accounts that made transactions last week fell to 5.6 million, the least
for a five-day week since at least January 2008. Zhongjin Gold Co.
lost 3.3 percent as the metal’s price retreated. CSR Corp. slid 2.4
percent as rail companies dropped. The Shanghai Composite Index (SHCOMP)
slid 0.7 percent to 1,977.26 at 10:01 a.m. local time, heading for its
lowest close since
Jan. 16, 2009.
- China Isn’t Currency Manipulator by U.S. Law, Treasury Says. China
isn’t a currency manipulator under U.S. law, though the yuan “remains
significantly undervalued” and needs to rise further, the Treasury
Department said. China “has substantially reduced the level of official
intervention in exchange markets since the third quarter of 2011,” the
Treasury said in a statement accompanying its semi- annual currency
report to Congress yesterday. The yuan has gained 9.3 percent in nominal
terms and 12.6 percent in real terms against the dollar since June
2010, the Treasury said.
- China’s U.S. Debt Purchases Seen Limited, Former Adviser Says. China may limit its purchases of
U.S. Treasuries because the central bank has reduced its buying
of dollars at home, according to a Chinese academic who has
served as a government adviser. The People’s Bank of China has “noticeably” reduced its
purchases of dollars from local banks to allow commercial banks
to trade among themselves, Ding Zhijie, dean of finance at
Beijing’s University of International Business and Economics,
said in a Nov. 23 interview. That may cap the nation’s foreign-
exchange reserves and consequently its demand for U.S.
government debt, he said.
- Green Mountain(GMCR) Profit Gains 22% as K-Cup Sales Rise. Green Mountain Coffee Roasters Inc.,
the maker of Keurig brewers and single-serve pods, said fiscal
fourth-quarter profit rose 22 percent as K-Cup sales gained.
- Obama Had Unannounced Fiscal Cliff Talk With Finance CEOs. President Barack Obama’s efforts to
engage business leaders in negotiations to avoid the year-end
fiscal cliff have included unannounced private talks with top
financial executives at the White House.
- Deutsche Bank(DB) Sued Over Home Mortgage-Backed Securities. Deutsche
Bank AG (DBK), Germany’s largest lender, was sued by a trustee claiming
that some securities sold by a unit of the bank were backed by
home-mortgage loans taken out by fraudulent borrowers. DB Structured
Products Inc.’s pool of more than 1,500 mortgages included more than
320 that were defective, HSBC Bank USA (HSBA), acting as trustee, said
in a lawsuit filed today in federal
court in Manhattan.
Wall Street Journal:
- Fiscal Cliff: Live Stream.
- Global Steel Industry Faces Capacity Glut. Global steel has a big problem: It's too big and it's getting bigger.
This year, steel mills around the world
have a production capacity of 1.8 billion tons but will take orders for
only 1.5 billion tons. And instead of consolidating and becoming more
efficient, the industry is building still more capacity. By 2016, an estimated 100 new mills, with total estimated supply
capacity of 350 million tons, are expected to come on stream, according
to industry executives and consultants. Companies in Vietnam, Argentina,
Ecuador, Peru and Bolivia, all backed in some way by their governments,
are building or planning new mills. Officials in these countries say they want to invest in industrial
development, supply homegrown steel to their manufacturers and cut
imports. But what may appear to be welcome developments for local
economies has reverberations through a global industry. "You see people
wanting to build new facilities all the time, all over the world," says
Dan DiMicco, CEO of Nucor Corp.(NUE), the second-biggest U.S.
steelmaker, and a proponent of more consolidation.
- Windows 8 Touchscreen Laptops See Slow Start. One
month into the launch of Windows 8, sales are sluggish, say some Asian
PC makers – even the ones making the most popular products. “Demand for
Windows 8 is not that good right now,” said Asustek Computer Inc. Chief
Financial Officer David Chang.
- Morgan Stanley(MS) CEO Asks Employees to Press Congress on Fiscal Cliff. Morgan
Stanley Chief Executive James Gorman enlisted his employees to pressure
Congress to reach a bipartisan deficit-reduction deal, one of the most
high-profile in a series of moves by major corporations seeking to
influence the course of negotiations. Mr. Gorman, in an email
Tuesday, asked Morgan Stanley ’s more than 16,000 U.S. financial
advisers and branch managers to contact
their members of Congress and urge them to reach “a bipartisan
compromise” to avoid a year-end budget crisis known as the “fiscal
cliff.”
- Executives' Good Luck in Trading Own Stock.
- Hope and Exchange. The feds blame the states for refusing to become ObamaCare subsidiaries. ObamaCare is due to land in a mere 10 months—about 300 days—and the
Administration is not even close to ready, so naturally the political
and media classes are attacking the Governors and state legislators who
decline to help out. Mostly Republicans, they’re facing a torrent of
abuse in Washington and pressure from health lobbies at home.
But the real story is that Democrats
are reaping the GOP buy-in they earned. Liberals wanted government to
re-engineer the entire health-care system and rammed the Affordable Care
Act through on a party-line vote, not stopping to wonder whether it
would work. Now that implementation is proving to be harder than
advertised, they’re blaming the states for not making their jobs easier.
Fox News:
- Republicans say raising tax rates alone will hardly put dent in budget, deficit. Republican
congressional leaders, in their battle to extend the current low tax
rates for all Americans, drive home Tuesday their argument that ending
those rates for families earning more than $250,000 a year would produce
only enough money to run the government for less than nine days.
The lawmakers pointed out that President Obama's tax rate plan would
generate just $82.3 billion annually, as estimated by the non-partisan
Congressional Budget Office.
MarketWatch.com:
- Analog Devices'(ADI) profit falls; shares down. Analog Devices Inc.'s fiscal fourth-quarter earnings fell 2.4% as the chip maker continued to
be hurt by weak demand, resulting in sales declines at most of its
business segments. Shares were down 3.2% at $38.81 in recent after-hours trading as the
company projected fiscal first-quarter results below expectations.
- China seen losing ‘world factory’ status within a decade. Early signs that Southeast Asian nations are trumping China as a home to
low-cost manufacturing are likely to gather momentum in the next few
years, costing the Middle Kingdom its status as the world’s factory
within the next five to 10 years, according to Daiwa Capital Markets.
CNBC:
- Asean Chief Warns on South China Sea Disputes. Southeast Asia’s top diplomat has warned that the South China Sea
disputes risk becoming “Asia’s Palestine”, deteriorating into a violent
conflict that draws sharp dividing lines between nations and
destabilises the whole region.
- China's Passport Propaganda Baffles Experts. China’s neighbors are seething with anger over new Beijing-issued
passports that they see as the latest, underhand, Chinese jab in an
ongoing regional row about maritime territory.
Zero Hedge:
Business Insider:
LA Times:
- Striking union sets picket line at Port of Los Angeles terminal.
A strike has been called in a long simmering labor dispute that pits a
small union of clerical workers against some of the world's largest
ocean shipping lines and cargo terminal operators. About 67 workers from
the International Longshore and Warehouse Union Local 63's Office
Clerical Unit set up a picket line outside the APM Terminal at the Port
of Los Angeles. The terminal and surrounding facility is also known as
Pier 400. At 484 acres, it is the biggest and busiest cargo terminal in
the Americas for containerized freight.
CNN:
- Eurozone states face losses on Greek debt. Eurozone governments could be forced to accept losses on their rescue
loans to Greece after Monday's late-night deal to overhaul its bailout
failed to agree how to reach new debt targets for the struggling
country, according to documents seen by the Financial Times. After three gatherings in
two weeks, eurozone finance ministers agreed to release a long-delayed
€34.4bn aid payment to Athens. But the series of measures agreed, which
could relieve Greece of billions of euros in debt by the end of the
decade, do not go far enough. The measures to be
implemented immediately as part of the deal will only lower Greece's
debt levels to 126.6 per cent of economic output by 2020, not the 124
per cent announced by eurozone leaders, according to the documents and
senior officials. Instead, eurozone
governments postponed further debt relief -- amounting to 2.7 percentage
points of gross domestic product -- to a later date, when Greece begins
taking in more money than it spends, not counting interest payments.
Reuters:
Telegraph:
Welt:
- Bundesbank President Jens Weidmann says new agreement for Greek aid contains no direct transfers from the Bundesbank to the country, citing an interview.
China Securities Journal:
- Chinese
stocks' "one-sided" move higher is becoming history as the market
matures, according to a front page commentary published on the front page, written by Li Bo, a reporter at the newspaper. Investors should actively adjust to the market, he said. The continued fall of Chinese stocks is due to "tensed" short-term capital, implications from external markets and shares unlocking, citing analysts. The short-term trend of the Shanghai Composite is "not optimistic," citing market analysts.
Financial News:
- China's
monetary policy shouldn't be "too loose" and could be tightened if
necessary, citing Bank of Communications economist Lian Ping. Monetary
policy should limit liquidity, avoid "overly fast" investment growth and
avoid high asset prices, citing Lian. Tighter monetary policy will
likely cause yuan appreciation pressure, Lian said.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 113.0 -1.75 basis points.
- Asia Pacific Sovereign CDS Index 83.25 -1.5 basis points.
- FTSE-100 futures -.16%.
- S&P 500 futures -.11%.
- NASDAQ 100 futures -.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (TFM)/.26
- (ANN)/.74
- (AEO)/.39
- (RUE)/.39
- (PLL)/.66
- (GES)/.44
- (ARO)/.29
- (JOSB)/.55
- (PFCB)/.37
Economic Releases
10:00 am EST
- New Home Sales for October are estimated to rise to 390K versus 389K in September.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +350,000 barrels versus a -1,466,000 barrel decline the prior week. Gasoline inventories are estimated to rise by +900,000 barrels versus a -1,547,000 barrel decline the prior week. Distillate
supplies are estimated to rise by 500,000 barrels versus a -2,675,000
barrel decline the prior week. Finally, Refinery Utilization is
estimated to rise by +.5% versus a +1.5% gain the prior week.
2:00 pm EST
Upcoming Splits
Other Potential Market Movers
- The Fed's Taruillo speaking, 5Y T-Note auction, weekly MBA mortgage applications report, Jefferies Energy Conference, CSFB Aerospace/Defense Conference and the JPMorgan SMid Cap Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Modestly Lower
- Sector Performance: Most Sectors Declining
- Volume: Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- VIX 15.77 +1.74%
- ISE Sentiment Index 94.0 -35.6%
- Total Put/Call .81 +21.57%
- NYSE Arms 1.59 +37.81%
Credit Investor Angst:
- North American Investment Grade CDS Index 102.08 +1.32%
- European Financial Sector CDS Index 162.48 -2.28%
- Western Europe Sovereign Debt CDS Index 109.0 bps -3.94%
- Emerging Market CDS Index 255.69 bps -.62%
- 2-Year Swap Spread 12.5 -1.0 basis point
- TED Spread 23.0 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -28.25 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .08% -1 basis point
- Yield Curve 138.0 -2 basis points
- China Import Iron Ore Spot $117.90/Metric Tonne -.25%
- Citi US Economic Surprise Index 49.0 +1.5 points
- 10-Year TIPS Spread 2.39 unch.
Overseas Futures:
- Nikkei Futures: Indicating -70 open in Japan
- DAX Futures: Indicating +2 open in Germany
Portfolio:
- Slightly Lower: On losses in my Tech/Medical sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my (EEM) short
- Market Exposure: Moved to 25% Net Long
