Style Underperformer:
Sector Underperformers:
- 1) Gaming -3.01% 2) Coal -1.71% 3) Restaurants -1.53%
Stocks Falling on Unusual Volume:
- DMD, IACI, WYNN, FSC, COT, AAPL, CTCM, PCS, PVTB, IOC, LEAP, FHN, USB, NMFC, DRI, MTN, FRC, SSYS, APL, GPS, SYNT, YOKU, SINA, VOLC, EDU, CAKE, SFUN, MPEL, STMP, PKY, NXTM, AMAP, BIDU, NTES, QIHU, LPSN, GMED and ESL
Stocks With Unusual Put Option Activity:
- 1) GPS 2) BMC 3) XLF 4) FITB 5) XLB
Stocks With Most Negative News Mentions:
- 1) COH 2) TSCO 3) CCL 4) AZO 5) IACI
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Networking +.95% 2) Oil Service +.65% 3) Tobacco +.63%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) TXN 2) CXW 3) UPL 4) DRI 5) MDVN
Stocks With Most Positive News Mentions:
- 1) COH 2) MTN 3) JEC 4) DSW 5) DAL
Charts:
Evening Headlines
Bloomberg:
- Grand Bargain Inadequate to Fix U.S. Fiscal Woes, Study Finds.
(video) Even a so-called grand bargain might not be enough to solve the U.S.
fiscal woes. A $4 trillion combination of spending cuts and tax
increases over 10 years envisioned by Democrats and Republicans as a
long-term fix would be inadequate, according to a Bloomberg Government
study. Almost $6 trillion in deficit reduction will be needed in the
next decade "to make a minimum down payment that puts the nation on a
sounder fiscal footing," the report said.
- Islands Seek Funds for Climate Damage at UN Discussions. Islands that are most vulnerable to rising oceans are
seeking an insurance program to protect against damage related to
climate change, adding to pressure on industrial nations to increase aid
committed to fight global warming to more than $100 billion a year. The
islands are proposing a “loss and damage” mechanism that would insure
and compensate countries that suffer from extreme weather, erosion and
drought. The request is raising tension levels among more than 190
industrial and developing nations at United Nations climate talks in
Doha this week. “All we are asking is that they help us with
these issues that aren’t our doing,” Malia Talakai of Nauru, lead
negotiator for the Alliance of Small Island States, or AOSIS, a bloc of
43 island nations, said in an interview in Doha. “We are trying to say
that if you pollute you must help us.”
- Most Accurate Economic Forecaster Sees Lethargic U.S. Expansion. Shapiro has scored the top spot among forecasters of the U.S. economy
for the two-year period ended on Sept. 30, according to data compiled
for the annual Bloomberg Markets ranking of global forecasters. Shapiro sees monetary policy, with the Federal Reserve benchmark
interest rate at almost zero, as having a limited near-term impact on
growth. And he considers the $1 trillion U.S. fiscal deficit an
important drag on future expansion. “There is an element of
repetitiveness in being an economist these days, because adjustments
that affect the economy are all very long-term and are not going to
change anytime soon,” he says.
- China’s Stocks Drop to Lowest Level Since 2009; Moutai Declines. China’s
stocks fell, dragging the benchmark index down for the sixth time in
seven days, as liquor shares extended yesterday’s rout on concern demand
will weaken. Kweichow Moutai Co. dropped for a third day, pushing
losses for a gauge of consumer staples producers over the past month to
20 percent after excessive levels of plasticizer were found in JiuGuiJiu
Co. products. Chengdu B-Ray Media Co. plunged 10 percent, sending a
gauge of small-company stocks to the lowest level since March 2009. The
Shanghai Composite Index (SHCOMP) slipped 0.4 percent to 1,951.85 at the
11:30 a.m. break, heading for the lowest level since Jan. 15, 2009. “Investors
have kind of given up for this year,” Zhang Haidong, analyst at Tebon
Securities Co. analyst, said by telephone in Shanghai. “The stock market
hasn’t reached a
bottom yet. Investors are concerned that demand for high-end
products like liquor will suffer.”
- SEC Says Big Four Audit China-Affiliates Blocked Probe. U.S. regulators probing potential
fraud by China-based companies increased pressure on their
auditors by formally accusing affiliates of Big Four firms of
withholding documents from investigators. Deloitte Touche Tohmatsu
CPA Ltd., Ernst & Young Hua Ming LLP, KPMG Huazhen and
PricewaterhouseCoopers Zhong Tian CPAs Limited have refused to cooperate
with accounting fraud investigations into nine companies whose
securities are publicly traded in the U.S., the Securities and Exchange
Commission said in an administrative order yesterday. BDO China Dahua
Co. Ltd. was also named by the SEC in the action.
- Hong Kong Leads Singapore, U.S. in Youth Gap: Chart of the Day. Singapore Prime Minister Lee Hsien Loong’s concern about a low birthrate
underscores a common problem in the world’s richest nations, where
shrinking pools of workers and taxpayers will shift burdens onto the
elderly.
- Japan Deploys Missile Defense Against North Korean Rocket Test. Japan will deploy its Patriot anti-
missile defense system in Okinawa and around Tokyo to guard
against this month’s planned North Korean rocket launch, the Defense Ministry said.
Ships carrying PAC-3 missile interceptors set out for Okinawa from a
naval base in Hiroshima yesterday, Defense Ministry spokesman Takaaki
Ohno said. The move follows an order issued by Defense Minister Satoshi
Morimoto over the weekend, he added. North Korea said last weekend it will fire a rocket between Dec. 10 and Dec. 22 to put a satellite into space, the same
explanation given for an April launch that failed shortly after
liftoff.
- Japan Tunnel Collapse Threatens to Add to Fiscal Burden: Economy. Japan’s fatal tunnel tragedy this
week escalated a political debate over infrastructure spending
as the nation heads for elections, bringing focus to aging
transport networks in the world’s third-largest economy.
- RBA Cuts Key Rate to Half-Century Low of 3% as Hiring Slumps. The Reserve Bank of Australia cut its
benchmark interest rate to the half-century low set during the
2009 global recession as hiring falters and an elevated currency
hurts industries such as manufacturing and tourism. Governor Glenn Stevens and his board reduced the overnight
cash-rate target by a quarter percentage point to 3 percent, the
central bank said in a statement in Sydney today. The sixth cut
in the past 14 months was predicted by 20 of 28 economists
surveyed by Bloomberg. The rate matches the level reached from
April-October 2009 that was the lowest since 1960.
- Qualcomm(QCOM) Said to Agree to 5 Billion Yen Investment in Sharp. Sharp Corp. (6753), the Japanese TV maker
that warned last month about its ability to survive, agreed to
sell a stake in itself to Qualcomm Inc. and team up with the U.S.
company to make displays, two people familiar with the plan said. Sharp plans to make an announcement today on the agreement,
which includes selling 5 billion yen ($61 million) of new shares
to the San Diego-based chipmaker this year, one of the people
said, asking not to be named because the plan hasn’t been made
public. That would give Qualcomm a 2.6 percent stake in Sharp,
based on its 191 billion yen market value yesterday.
Wall Street Journal:
- GOP Makes Counteroffer In Cliff Talks. Proposal Calls for $800 Billion Increase
In Revenue, Half What Obama Seeks. The GOP offer was immediately rejected by the White House, but it
provides the most detailed statement to date of what Republicans are
willing to concede for now. It comes days after the White House put
forward its opening bid in the high-stakes deficit talks. With both
sides now having made preliminary offers, the parameters for future
negotiations between Republicans and the White House are becoming
clearer.
- Fiscal Cliff: Live Stream.
- GM(GM) Moves to Reduce Inventory. General Motors Co., saddled with large stocks of unsold cars and trucks, is taking steps
to cut excess production and signaled there may be more to come. Workers
at its Lordstown, Ohio, assembly plant soon will be off the job for
three weeks instead of a planned two-week Christmas shutdown as the
Detroit auto maker curtails Chevrolet Cruze output. A second U.S. plant also may be idled according to a person familiar with the matter. The company also said on Monday that year-end inventories of Silverado
and Sierra pickups may exceed 220,000 vehicles in part due to a decision
to hold the line on discounts. The higher-than-expected supply will
likely push GM's overall car and truck inventory beyond a year-end
target of 670,000 vehicles.
- Top U.S. Firms Are Cash-Rich Abroad, Cash-Poor at Home.
- U.S. Warns Syria on Chemical Arms. White House Draws 'Red Line' After Seeing Large Stockpile Movement, but Pentagon Remains Opposed to Land War.
- China Tightens Reins on Macau. Police in Gambling Enclave, Mainland Detain Junket Operators; First Sign of a Corruption Crackdown. The Chinese government is increasing its scrutiny of Macau's booming
casino industry and the junket operators that bankroll its high-rolling
gamblers, the first sign of a crackdown on corruption following
stepped-up rhetoric by China's new leadership.
- Matthew Kaminski: Trying to Save Europe 'Step by Step'.
Finance Minister Wolfgang Schäuble on Germany's balancing act between
euro scold and bailout enabler. Last week's Greek deal depends on the
successful buyback of bonds
from private creditors later this month, and it makes rosy assumptions
about future Greek growth. Within hours of its approval, Mr. Schäuble
had to admit that the deal might not be enough to stave off Greek
insolvency. He says that alternatives are available down the road but
won't "explicitly" spell them out. Germany first needs to see the
promised Greek reforms "fully implemented." "If there is no crisis, Europe doesn't move," Mr. Schäuble says. "If
you have success you start to destroy the basis of the success. That is
what Sisyphus is about."
Zero Hedge:
Business Insider:
IBD:
Washington Post:
- U.S. pushes to restart peace talks with Taliban. The
Obama administration has launched a post-election push to restart
moribund peace talks with the Taliban, despite resistance from the U.S.
military, mixed signals from Pakistan and outright refusal by the
militants themselves, according to U.S. officials. Senior White House
and State Department officials reiterated the administration’s
negotiating position — including its willingness to exchange prisoners
with the Taliban — to a reluctant Defense Department at a meeting of
national security deputies two weeks ago.
NY Times:
- High-Speed Trades Hurt Investors, a Study Says.
A top government economist has concluded that the high-speed trading
firms that have come to dominate the nation’s financial markets are
taking significant profits from traditional investors. The chief economist at the Commodity Futures Trading Commission, Andrei
Kirilenko, reports in a coming study that high-frequency traders make an
average profit of as much as $5.05 each time they go up against small
traders buying and selling one of the most widely used financial
contracts.
Reuters:
Financial Times:
- Europe’s property loans go unpaid. More
than 70 per cent of the European commercial property loans that were at
the heart of securitisation deals structured before the subprime crisis
and that reached maturity this year have not been repaid. Fresh figures from Fitch Ratings point to the continued difficulties
facing issuers and investors involved in European commercial
mortgage-backed securities deals that were structured in the
securitisation boom between 2004 and 2006.
- Yen short positions hit five-year high.
Telegraph:
- French economy buckles as car sales collapse. France’s industrial woes deepened last month as car sales crashed 19pc and
French brands lost market share at an dramatic pace, raising fears of a
serious economic crisis next year once austerity hits.
Globe and Mail:
- Investors fume at Sprott’s shakeup of Flatiron funds. Just six months after Sprott Inc. bought
Flatiron Capital Management, the asset manager is shutting one of the
acquired funds and replacing the managers of the others after assets
under management plummeted by 45 per cent.
Yonhap News Agency:
- U.S. to mull 'appropriate actions' if N. Korea fires rocket: Samore. A senior security aide to President Barack Obama said Monday the U.S. is
concentrating efforts in cooperation with South Korea, China, Russia
and Japan to dissuade North Korea from pressing ahead with another
rocket launch. Gary Samore emphasized that if the launch takes place
Washington will take "appropriate actions." "We've made it very clear
that we consider this to be a very
unfortunate provocative event, which is not going help North Korea nor
the people of North Korea," Samore told Yonhap News Agency.
Kontan:
- United Tractors Co. Estimates 2012 Sales May Fall 27%. The co. expects heavy equipment sales may fall to 6,200 units in 2012, from 8,500 units last year, citing Director Loudy Ellias.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 112.5 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 84.0 +1.25 basis points.
- FTSE-100 futures -.36%.
- S&P 500 futures -.30%.
- NASDAQ 100 futures -.24%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (TOL)/.24
- (BIG)/-.26
- (AZO)/5.39
- (OXM)/.21
- (MFRM)/.46
- (P)/.01
- (AVAV)/.22
Economic Releases
Upcoming Splits
Other Potential Market Movers
- The Fed's Bullard speaking, Eurozone inflation data, Canada rate decision, Australia GDP, China HSBC Services PMI, weekly retail sales reports, (ASH) analyst day, (URI) investor day, ISM New York for November and the Goldman Sachs Financial Services Conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and commodity
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.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Volume: Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- VIX 16.69 +5.17%
- ISE Sentiment Index 95.0 +9.2%
- Total Put/Call .78 -33.33%
- NYSE Arms 1.12 +26.92%
Credit Investor Angst:
- North American Investment Grade CDS Index 99.50 +.89%
- European Financial Sector CDS Index 160.19 -3.36%
- Western Europe Sovereign Debt CDS Index 106.38 bps -1.85%
- Emerging Market CDS Index 233.0 bps -1.87%
- 2-Year Swap Spread 12.0 -.75 basis point
- TED Spread 23.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -23.75 +1 bp
Economic Gauges:
- 3-Month T-Bill Yield .08% unch.
- Yield Curve 137.0 unch.
- China Import Iron Ore Spot $115.30/Metric Tonne -.26%
- Citi US Economic Surprise Index 35.10 -8.0 points
- 10-Year TIPS Spread 2.44 +2 basis points
Overseas Futures:
- Nikkei Futures: Indicating -13 open in Japan
- DAX Futures: Indicating -9 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: None
- Market Exposure: 25% Net Long
Bloomberg:
- Euro-Area Manufacturing Contracts for 16th Straight Month. Euro-area
manufacturing output contracted for a 16th month in November, adding to
signs a recession in the currency bloc may extend into next year as
leaders struggle to tackle the sovereign-debt crisis. A gauge of manufacturing in the 17-nation euro area rose to 46.2 from 45.4 in October,
London-based Markit Economics said today. That’s in line with an
initial estimate on Nov. 22. A reading below 50 indicates contraction.
The euro-area economy has shrunk for two successive quarters and
economists foresee a further decline in gross domestic product in the
final three months of the year. The Organization for Economic
Cooperation and Development last week forecast contractions of 0.4
percent and 0.1 percent this year and next. “The ongoing steep pace
of manufacturing decline suggests that the region’s recession will have
deepened in the final quarter of the year, extending into a third
successive quarter,” Chris Williamson, Chief Economist at Markit, said
in the report. “The rate of GDP decline is likely to have gathered pace
markedly on the surprisingly modest 0.1 percent decline
seen in the third quarter. With euro-area unemployment at a record, economists project
the region’s GDP will decrease 0.3 percent in the fourth
quarter, according to the median of 25 forecasts in a Bloomberg
survey.
- Greece Offers 10 Billion-Euro Debt Buyback to Unlock Aid. Greece
offered 10 billion euros ($13 billion) to buy back bonds issued earlier
this year as the bailed-out nation attempts to cut a debt load that may
threaten future international aid. Greek bonds rallied after the
so-called modified Dutch auction was announced today by the Athens-based
Public Debt Management Agency. The prices offered for bonds maturing
from 2023 to 2042 averaged 33.1 percent of face value, based on
information in a statement from the debt agency today, higher than
euro-area finance ministers indicated would be paid. The offer runs
until 5 p.m. London time on Dec. 7.
- ECB Can’t Deliver Spain Spread Rajoy Wants, Wellink Says.
Former European Central Bank policy
maker Nout Wellink said Spain can’t realistically expect officials to
narrow the bond spread with Germany to as little as 200 basis points, as
he predicted “execution problems” with the ECB’s bond program. If Prime Minister Mariano Rajoy envisages “that the
maximum difference with the Germans is 200 basis points, then he
makes a mistake,” Wellink, the former Netherlands central bank
governor who retired from the post in 2011, said in a Bloomberg
Television interview on Nov. 30. “Two hundred basis points
seems to me too much” to hope for, he said.
- Berlusconi Mulls Comeback as Italian Bonds Rally: Euro Credit.
The four-month rally in Italian bonds
risks stalling as former Prime Minister Silvio Berlusconi ponders a
comeback that will further shake up the political landscape before next
year’s election. Berlusconi’s possible return, a month after he said
he wouldn’t run, comes as the extra yield investors demand to hold
Italian 30-year bonds instead of similar-maturity German bonds fell to
the lowest since August 2011. The market signals investor confidence is
returning after the European Central Bank offered a bond-buying backstop
to defend the euro and Italian Prime Minister Mario Monti implemented
an economic overhaul to
contain the region’s second-biggest debt.
- China Stocks Drop to Lowest Since 2009 on Consumer Staples Rout. Chinese
stocks fell, dragging the benchmark index to its lowest level in almost
four years, as liquor makers and coal producers plunged. A gauge
tracking consumer-staple companies sank the most in three years.
Kweichow Moutai Co. (600519), the world’s second-largest distiller by
market value, tumbled the most since 2008 on
concern demand for high-end liquor is decreasing. Datong Coal
Industry Co. dropped 4.1 percent after the benchmark price for
thermal coal decreased. “The macroeconomic data may indicate that the economy is
improving but people don’t feel that on the ground,” Li
Guangming, an analyst at Dongxing Securities Co., said in a
telephone interview from Beijing today. The Shanghai Composite Index (SHCOMP) dropped 1 percent to 1,959.77
at the 3 p.m. local-time close, with about seven stocks
declining for each that gained.
- IMF Officially Endorses Capital Controls in Reversal. The
International Monetary Fund endorsed nations’ use of capital control
measures in certain circumstances, making official a shift in the works
for almost three years that will guide the fund’s advice to member
countries. In a reversal of its historic support for unrestricted
flows of money across borders, the Washington-based IMF said controls
can be useful when countries have little room for economic policies such
as lowering interest rates or when surging capital inflows threaten
financial stability. Still, it
said the measures should be targeted, temporary and not
discriminate between residents and non-residents.
- Obama's New Fiscal Cliff Ally: Your Local News Station. What I mean is that Obama’s greatest point of leverage over Republicans
is public fear and anger that, if successfully directed against his
opponents, will force them to accept a deal he likes. The media love
stoking public fear and anger. Especially local television news.
Wall Street Journal:
CNBC:
- One-Time Hedge Fund Wiz Faces Second Abysmal Year. One of the hedge funds run by John Paulson, whose prescient bets
against housing where chronicled in the book "The Greatest Trade Ever,"
is on track to be the second worst performer of 2012 among the universe
of funds tracked by HSBC. Last year, it was the worst. Paulson's
Advantage Plus fund, which uses additional leverage than
his other funds, is down 19 percent through the end of October,
following a 53 percent loss last year. The fund bests just the Conquest
Macro Fund, which is down 27 percent through the end of November. The
firm's other flagship fund, the Paulson Advantage Fund, is down 13
percent this year, putting it among the top 10 losing funds in the HSBC
universe this year as well.
- Four Reasons Why Companies Are Still Reluctant to Hire.
- General Motors(GM) November Auto Sales Below Estimates Up 3.4%. General Motors sales fell short of estimates, rising up 3.4 percent in November. Ford Motor sales rose more than expected, up 6.5% in November. Chrysler Group and Hyundai Motor
on Monday both reported strong U.S. new-vehicle sales in November, as
the industry rebounded from a storm-ravaged October while also
benefiting from pent-up demand.
- Morici: Soaking the Rich Won’t Solve Much.
Reuters:
- Singapore concerned over China's South China Sea rule. Singapore expressed concern on Monday over China's plan to board and search
ships sailing in what it considers its territory in the South China Sea, as
tension grows over Beijing's sovereignty claims in busy Southeast Asian
waters. "Singapore is concerned about this recent turn of events," the Ministry of
Foreign Affairs said in response to a recent Chinese media report on new rules
that will allow police in the southern Chinese province of Hainan to board and
seize control of foreign ships which "illegally enter" its waters from January
1.
- US says climate plan on track, EU wants more. The United States said on Monday it
was on track to meet its own target of cutting greenhouse gas
emissions by 2020, a plan many scientists say is still too weak
to avert damaging global warming.
- That fiscal cliff? Dow Chemical(DOW) says China's a bigger worry.
Telegraph:
Handelsblatt:
- Luxembourg Prime Minister Jean-Claude Juncker told euro-area finance ministers including Germany's Wolfgang Schaeuble that he plans to retire from the post early next year, citing EU diplomats.
Style Underperformer:
Sector Underperformers:
- 1) Defense -1.25% 2) Road & Rail -1.06% 3) Retail -.91%
Stocks Falling on Unusual Volume:
- PBH, EXC, REXX, CEL, IRE, BKU, DISH, TPCG, CONN, SXC, SPLK, MYGN, GMED, HWD, HCI, DWA, VNTV, DDD, ALOG, MGAM, RATE, MLNX, THRX, EXC, APL, HI, WRLD, TSCO, RGR, TRLG and RGC
Stocks With Unusual Put Option Activity:
- 1) PBI 2) LYV 3) XLK 4) UAL 5) DECK
Stocks With Most Negative News Mentions:
- 1) ETN 2) MYGN 3) PPG 4) NVDA 5) VLO
Charts:
