Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Almost Every Sector Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- ISE Sentiment Index 115.0 -30.3%
Credit Investor Angst:
- North American Investment Grade CDS Index 89.20 -2.90%
- European Financial Sector CDS Index 139.15 -5.45%
- Western Europe Sovereign Debt CDS Index 109.91 -.45%
- Emerging Market CDS Index 206.55 -1.72%
- 2-Year Swap Spread 11.5 -1.0 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -22.75 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% +2 bps
- China Import Iron Ore Spot $132.20/Metric Tonne unch.
- Citi US Economic Surprise Index 47.0 -.4 point
- 10-Year TIPS Spread 2.50 +2 bps
Overseas Futures:
- Nikkei Futures: Indicating +132 open in Japan
- DAX Futures: Indicating +6 open in Germany
Portfolio:
- Higher: On gains in my retail, tech, medical and biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- French Health Care for Everyone Means Unwanted Generic Medicine. Anita Manfredi got 18 mud baths, nine massages and 12 spray showers at a
spring water spa last month. The French state footed two-thirds of the
$1,022 bill. Manfredi isn’t the only lucky recipient. Homeopathic remedies, support
tights, taxi rides to the hospital for country dwellers and
vaginal-muscle retraining for new moms are among benefits reimbursed by
the health-care branch of France’s social security, known as assurance maladie.
- Investors Are Most Bullish Ever on China Economic Growth. More
investors than ever say they
are bullish about China’s economic outlook, and more favor European
rather than U.S. stocks for the first time in two years, a Bank of
America Corp. monthly survey showed. A net 67 percent of money managers,
who together oversee $503 billion, predicted that China’s economy will
grow at a
faster rate next year, the highest reading since the survey data
started in 2003. Some 7 percent hold more European stocks than
appear in benchmarks, the poll showed.
- Middle East Oil-Tanker Glut Seen Unchanged in Shipbroker Survey. A surplus of the largest crude oil-
tankers available for loading in the Middle East will stay
unchanged over the next two weeks, according to a Bloomberg News
survey of shipbrokers. There are 20 percent more very large crude carriers for
hire over the next 30 days than there are cargoes, according to
the median estimate of seven shipbrokers and owners in a
Bloomberg News survey today. That’s the same as last week, the
data showed. The average surplus of the tankers this year is on
course for the lowest since at least 2009, survey data showed. VLCCs are earning $16,860 on the benchmark Middle East-to-
Asia voyage, according to the London-based Baltic Exchange.
That’s a 2 percent decline since the start of the month and down
40 percent from the November high.
- Highest-Paid California Trooper Is Chief Banking $484,000.
California Highway Patrol division chief Jeff Talbott retired last year
as the best-paid officer in the 12 most-populous U.S. states,
collecting $483,581 in salary, pension and other compensation. Talbott,
53, received $280,259 for accrued leave and vacation time and took a new
job running the public-safety department at a private university in
Southern California. He also began collecting an annual pension of
$174,888 from the state.
- Gee Takes Jets as $1.9 Million Payday Roils Ohio Students. The
Ohio State University President E. Gordon Gee lives in a
9,630-square-foot Tudor Revival mansion that was renovated for him,
featuring a great
hall, pool, elevator and tennis court. Gee made $1.9 million last year
as the highest-paid public university
president in the U.S. He also logged $1.7 million in expenses in fiscal
2011, including airfare for trips in private jets, country club dues and
fundraising parties at his residence. “He’s overpaid,” said CJ Jones, 19, a junior public affairs major at
Ohio State, whose tuition has risen 9.7 percent during her 2 1/2 years
at the university, based in Columbus, the state capital. “You should
want that job for a sense of Buckeye pride. Why do you have to suck so
many resources from our budget? I know kids graduating from OSU with
$90,000 in debt, and it’s a public university.”
- Wells Fargo(WFC) Buys 35% Stake in Hedge-Fund Firm Rock Creek Group. Wells Fargo & Co. (WFC), the biggest U.S. bank by market value, bought a stake in Rock Creek Group LP to
provide more hedge-fund offerings to clients amid a push to
double the asset-management unit within seven years.
CNBC:
- No 'Cliff' Deal by Week's End: GOP Sen. Corker. (video)
Senator Bob Corker told CNBC on Tuesday that he does not think a deal
to avoid the "fiscal cliff" will be reached by the end of this week. The
Tennessee Republican said in an interview on CNBC's "Squawk Box" that he's really surprised by the media's optimism over President
Barack Obama's new offer to House Speaker John Boehner, which features
concessions on revenue. "We are not close to a deal," Corker said. "I've been trying for three
weeks — standing on my head, doing cartwheels — to try to pivot to entitlement reform. This is not a deal here." (Read More: Boehner Proposing a "Plan B" Option)
- US Policy Gridlock Holding Back Economy? Maybe Not. Washington thinks a resolution of the tense debate over the national
debt will unlock a burst of economic growth by lifting uncertainty that
has stymied investment. It is a widely held view on Wall Street as
well, derived from the glaring signs of weak business confidence over
the last year as America struggles to get its fiscal house in order. However,
evidence for this belief is far from clear and is an issue of
considerable debate, and even some businesses wonder how big a factor
uncertainty is.
- Lindsey: Obama Moves Goal Posts ‘Out of the Ballpark’. President Barack Obama's latest "fiscal cliff" offer does not move
the goal posts closer in negotiations with House Speaker John Boehner,
it moves them "out of the ballpark," said former Bush administration
economic adviser Lawrence Lindsey. "The president campaigned on
tax increases for [households] over $250,000 for a total of $970 billion
[in new revenue]," Lindsey told CNBC's "Squawk Box" on Tuesday. "So now
we're at $1.2 trillion … From what he campaigned on, he's is still
moving the goal posts away from a compromise."
- Trading 'Kill Switch' Coming Soon: NYSE Exec. U.S. regulators and exchanges are getting closer to a framework for a
"kill switch" that could be used to shut down trading before software
glitches get out of control and wreak havoc on markets, a top exchange
official said Tuesday.
- Why China May Be Facing US-Style Credit Crunch. China, already struggling with a slowing economy, may now be facing
the type of credit crunch that helped derail the U.S. economy four years
ago. Among the all-too-familiar ingredients: supposedly
risk-free—yet high-yield—investments, off-balance-sheet transactions,
little if any disclosure and investors who don't ask a lot of questions. All
this has one Wall Street analyst warning that China is "a step closer
to a potential credit event in the shadow banking sector."
Reuters:
- Fed's Fisher says quantitative easing not very effective. Dallas Federal
Reserve President Richard Fisher said Tuesday he had opposed the
Fed's recent bond-buying programs because he did not think they
are very effective in bringing down the high jobless rate, a top
Fed official said on Tuesday. "I don't think it's as effective...as my colleagues do," he
told the Gainesville Area Chamber of Commerce.
- ECB'S Praet says France must cut spending, start reforms.
France must cut spending in order to meet its budget deficit target and
undertake structural reforms to boost competitiveness, European Central
Bank Executive Board Member Peter Praet said on Tuesday. "France has
too often resisted change," Praet said in an interview with French daily
Le Figaro. "There is a consensus now in France on the need to improve
public finances and competitiveness. To do that, structural reform is
needed." He also said euro zone countries should not back away from
meeting a 3 percent deficit target despite an economic downturn in the
bloc.
- World 2013 growth seen slow, political risks remain-bank group. Political
risks ranging from turmoil in Italy to potential impediments to euro
area reform could hamper the world economy next year, a global banking
group warned on Tuesday as it projected another year of sluggish growth.
In a somewhat gloomy forecast for 2013, the Institute of
International Finance said fiscal policy in the United States and
tensions between Japan and China could also weigh, although emerging economies should continue to improve. The
bank lobby group said it expected the global economy to grow just 2.7
percent next year, s carcely a pick-up from the modest 2.5 percent it
sees for 2012. A year ago, it had predicted world growth of 3.7 percent for 2013.
- Medicaid, other costs threaten NY state and local budgets-report. Costs for Medicaid, education
and employee retirement benefits are threatening to overwhelm
state and local government budgets in New York, a report by a
national task force issued on Tuesday found.
- French banks will know new liquidity ratios in Jan -Noyer.
Bank of France Governor Christian Noyer said on Tuesday that French
banks will find out in January how liquidity requirements will change
under the new banking rules set out in Basel III. "The liquidity ratios
were set a bit quickly, they hadn't
been calibrated very well and we're finalising the reforms to
the ratios," Noyer told BFM radio.
- US, Europe may take five years to recover from jobs crisis, UN says. Global economic growth is
expected to remain sluggish in the coming year and will be
insufficient to pull countries out the unemployment crisis many
are facing, the United Nations said in a report on Tuesday. It said
under policies now in place it may take at least
five years to recover from the job losses in Europe and the
United States in the 2008-2009 recession. "A worsening of the euro area
crisis, the 'fiscal cliff' in the United States and a hard landing in
China could cause a new global recession," said Rob Vos, head of the
U.N.
Development Policy and Analysis Division. "Each of these risks could
cause global output losses of between 1 and 3 percent."
Financial Times:
- Corporate credit and the lessons of CPDOs. With
such substantial leverage, investors should question the sustainability
of existing risk spreads if monetary policy fails to sustain current
economic growth rates. Commentators, including this one, have previously
noted the possible negative consequences of quantitative easing
policies and zero bound interest rates.
AFR:
- China puts foot down over Huawei.
The Chinese government has warned Australia risks jeopardising its role
in China’s economic transformation unless it stops discriminating
against Chinese companies, including telecommunications equipment
manufacturer Huawei. China’s ambassador to Australia, Chen Yuming,
said Chinese investment would continue to focus on Australia’s
substantial mineral resources. But as the Chinese economy became less
reliant on producing exports, there would be a greater emphasis on
investments in agriculture and consumer goods. Mr Chen said China did
not want to see a repeat of what he said was the “discriminatory’’
decision to ban Huawei from building part of the national broadband
network on security grounds.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.11% 2) Telecom -.12% 3) HMOs -.37%
Stocks Falling on Unusual Volume:
- CNH, SA, AUQ, USM, RAI, LO, NG, NRGY, DISH, TBBK, FDS, RGR, SLGN, NRGY, CAB, VCRA, VVI, USM, CNC, WWD, MDP, AXS, LO, BPT, CBD, WRB and AEM
Stocks With Unusual Put Option Activity:
- 1) HOV 2) BHI 3) XLB 4) JNPR 5) UPS
Stocks With Most Negative News Mentions:
- 1) KSU 2) TRMB 3) TST 4) AMGN 5) HL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Education +2.62% 2) Steel +2.46% 3) Computer Hardware +2.25%
Stocks Rising on Unusual Volume:
- GDP, LVLT, ARB, TROX, SHFL, GBX, YOKU, CAJ, LOGM, SM, XXIA, PANW, RAX, CAR and FSL
Stocks With Unusual Call Option Activity:
- 1) HTZ 2) DNR 3) APOL 4) RAX 5) GIS
Stocks With Most Positive News Mentions:
- 1) CCE 2) NUS 3) NAV 4) ARB 5) CUB
Charts:
Evening Headlines
Bloomberg:
- Obama Offer Raises Tax Increase Threshold to $400,000. President
Barack Obama made a new budget offer that would raise taxes by $1.2
trillion and increase tax rates for households earning more than
$400,000 a year, up from $250,000, said a person familiar with the
talks. Obama’s plan would cut $1.22 trillion in federal spending,
including interest savings, said the person, who spoke on condition
of anonymity. It would change the inflation measure used to calculate
Social Security benefit increases. In his offer, Obama would increase the U.S. debt limit for two years.
- U.S. Banks Lack Liquidity to Withstand Crisis, Study Says. U.S.
banks representing more than half the industry’s assets need an
additional $840 billion in cash on hand to cover short-term obligations
if financial markets seize up again, according to a study. The 11
financial firms surveyed, which have about $9.2 trillion in combined
assets, need the funds in cash, Treasury bonds or other liquid assets to
cover 30 days of debt costs and other expenses under international
capital rules, according to a report released today by the New
York-based Clearing House, which represents 18 of the largest lenders.
The so-called liquidity coverage ratio, a buffer of banks’
liquid assets regulators require in case markets freeze,
improved from 59 percent in the fourth quarter of 2010 to 81
percent in the second quarter of this year, the Clearing House
said. Three of 11 companies surveyed have a coverage ratio of
100 percent or more while eight have shortfalls.
- China Home Prices Gain in Majority of Cities as Curbs Stay.
China’s new home prices rose in the majority of cities the government
tracks in November as property curbs slowed construction, reducing the
supply available for
sale. Prices climbed in 53 of the 70 cities from the previous
month, compared with 35 in October, according to data from the
National Bureau of Statistics today. That was the most in 18
months. Prices fell in 10 cities.
- China to Stick to
Property Curbs, Ministry Says. China will stick to its property curb
policies, Liao Yonglin, an official from the Ministry of Land and
Resources, said at a presser today, according to a transcript on the
ministry's website.
- China Foreign-Investment Declines for 12th Time in 13 Months.
Foreign direct investment in China fell for the 12th time in 13 months,
suggesting the nation’s economic-growth rebound has yet to attract a
fresh influx of capital spending from abroad. Investment dropped 5.4
percent in November from a year earlier to $8.29 billion, the Ministry
of Commerce said in Beijing today. FDI inflows in the first 11 months of
the year
fell 3.6 percent to $100 billion.
- Copper Falls as Supplies, Budget Impasse Signal Slowing Demand.
Copper fell to a one-week low in New York as a jump in stockpiles
monitored by the London Metal Exchange and a U.S. budget standoff added
to demand concerns.
Inventories in warehouses tracked by the LME rose for an
eighth session, climbing 9.5 percent to 298,625 metric tons, the
most since Sept. 5, 2008, exchange data showed today.
- Lacker Says Fed Asset Buying Won’t Speed Growth Above 2%.
Federal Reserve Bank of Richmond
President Jeffrey Lacker predicted the economy will grow 2 percent next
year and said the Fed’s stepped up purchases of bonds won’t do much to
spur the recovery. “It’s not clear that monetary policy, by itself,
can bring about any material improvement in economic growth,” Lacker
said today in a speech in Charlotte, North Carolina. “The supply of
bank reserves is already large enough to support the economic
recovery, and the benefits of further asset purchases are
unlikely to be sizeable.”
- General Motors(GM) idles Malibu plant in Kansas for 5 weeks-source. General Motors Co idled
the Kansas plant that makes the Chevrolet Malibu on Dec. 3 and
will not reopen it until Jan. 7 in an attempt to cut into the
hefty supply of the midsize sedan, said a source familiar with
the situation. The plant, in Fairfax, Kansas, was to be down for a
week-and-a-half beginning December 24 for a normal holiday
break. An extra 3-1/2 weeks of no-production days were added to
allow GM to work through the oversupply of the Malibu and the
Buick LaCrosse, which is also made at the plant.
- Samsung Wins Order Denying Apple Request for U.S. Sales Ban. Samsung Electronics Co. won a court order rejecting a permanent U.S.
sales ban on 26 of its devices sought by Apple Inc. following a jury
verdict in August finding infringement of six of the iPhone maker’s
patents.
Wall Street Journal:
- The Fiscal Cliff: Live Stream.
- Clues Hint at School Shooter's State of Mind.
- Struggles Mount for Greeks as Economy Faces Winter. Maria Katri sent her son to live at a charitable home for poor boys after Greece's economy crashed.
Now, as Greece slides deeper into
depression, the widowed mother is so poor that her teenage daughter, who
stills lives at home, is "jealous that her brother is having a better
time than her in the institution," Ms. Katri says. The spread of economic hardship is
fraying Greece's social fabric and straining its political cohesion as
the country enters the harshest winter of its three-year-old debt
crisis. Even the tightknit Greek family—an institution that has helped
the population to absorb a collapse in employment—is under pressure as
household incomes dwindle.
- Probe Sparks Split on Trades. A regulatory investigation into whether stock exchanges have given
unfair advantages to high-speed traders has sparked complaints against
the exchanges, fueling a broader debate about how the market operates
and is regulated. The Investment Company Institute, trade group for mutual funds,
complained in a recent letter to the Securities and Exchange Commission
that U.S. stock exchanges "facilitate strategies" for rapid-fire trading
firms "that can lead to disorderly markets or that can benefit market
participants at the expense of long-term investors."
- ECB Chief Defends Austerity Measures. European Central Bank President Mario Draghi urged governments to
build on "painful progress" they have made on narrowing budget deficits
and overhauling their economies, despite the near-term damage these
policies have inflicted on business activity and unemployment. Mr. Draghi's strident defense of fiscal austerity as a means of
ensuring economic growth in the long run comes against mounting
criticism that these measures are weakening already-fragile countries
such as Spain and Portugal, leading to persistently high unemployment
and sharp contractions in output.
- Apple(AAPL) in Talks With Foursquare About Data-Sharing Deal.
- ObamaCare's Faux Federalism. GOP Governors are smarter than some of their conservative critics. As for conservatives who say running an exchange is a last stand against
single-payer medicine, well, all we can say is good luck with that one.
ObamaCare was designed to make a Washington-dominated and -paid for
system inevitable. Within three or four years the same people who passed
ObamaCare will be talking about "solving" ObamaCare's
government-created problems with more government. The 26 Governors are
merely saying they won't be accomplices.
Fox News:
- The Cost of Spending: Federal government racking up huge tab. The problem is right now you have a situation in which the government in
its overspending ways tries to rationalize it by saying that actually
the problem is we're under-taxing the American public,” he said. “It's
like your irresponsible brother-in-law runs up his credit cards and goes
bust and says the real problem is because you've stopped sending me
checks."
CNBC:
- Even Without Congress, Obama Could Act to Restrict Guns. Unburdened by re-election worries and empowered by law to act without
Congress, U.S. President Barack Obama could take action to improve
background checks on gun buyers, ban certain gun imports and bolster
oversight of dealers.
Zero Hedge:
Business Insider:
Reuters:
- Obama held talks with Biden, Cabinet members on Newtown response. President Barack Obama held talks on Monday with Vice President Joe
Biden and three Cabinet members to look at ways to respond to the
Newtown, Connecticut, school shootings, a White House official said.
- Obama 'cliff' offer is flawed but positive - Boehner aides.
Aides to House of Representatives Speaker John Boehner said on Monday
the latest White House offer on resolving the fiscal cliff impasse is
flawed but moves negotiations in a positive direction. "Any movement
away from the unrealistic offers the president has made previously is a
step in the right direction, but a proposal that includes $1.3 trillion
in revenue for only $930 billion in spending cuts cannot be considered
balanced," said Brendan Buck, a Boehner spokesman. "We hope to
continue discussions with the president so we can reach an agreement
that is truly balanced and begins to solve our spending problem," Buck
said.
- Syria 'genuinely worried' extremists could get chemical weapons. Syria is "genuinely
worried" that some countries might equip extremist groups with
chemical weapons and then claim they were used by the Syrian
government, the country's U.N. envoy said in a letter to U.N.
chief Ban Ki-moon and the Security Council. Syria's U.N. Ambassador Bashar Ja'afari also accused the
U.S. government of supporting "terrorists" in Syria and waging a
campaign that claims Syria could use chemical weapons in the
20-month-old civil war that has killed at least 40,000 people.
- Boeing(BA) resumes $3.6 bln share repurchase program. Boeing Co said Monday it
will raise its dividend 10 percent and resume share repurchases
after suspending them in 2009. The Chicago-based aerospace company set a regular quarterly
dividend of 48.5 cents per share, payable on March 8, meaning
Boeing will not join Wal-Mart Stores Inc and other
companies that decided to issue dividends in December to avoid
the looming possibility of a tax increase in the new year.
- Wal-Mart(WMT) affiliate used bribes to open 19 new stores in Mexico: NY Times. Wal-Mart Stores Inc's
Mexican affiliate routinely used bribes to open stores in
desirable locations, according to a New York Times investigation
published Monday, which cites 19 instances of the retail giant
paying off local officials.
Telegraph:
- Major protests expected in Spanish cities. Hundreds of thousands of people are expected to pack the streets of Spanish
cities in evening protests against the conservative government's anti-crisis
austerity measures.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 109.0 unch.
- Asia Pacific Sovereign CDS Index 84.0 -.25 basis point.
- NASDAQ 100 futures +.33%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The 3Q Current Account Deficit is estimated at -$103.0B versus -$117.4B in 2Q.
10:00 am EST
- The NAHB Housing Market Index for December is estimated to rise to 47 versus 46 in November.
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, 5Y T-Note auction, weekly retail sales reports, China property price data and the (MED) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 165.0 +22.2%
- Total Put/Call .73 -17.98%
Credit Investor Angst:
- North American Investment Grade CDS Index 92.41 -2.87%
- European Financial Sector CDS Index 147.26 -3.14%
- Western Europe Sovereign Debt CDS Index 110.41 bps unch.
- Emerging Market CDS Index 209.33 bps +.29%
- 2-Year Swap Spread 12.5 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -23.0 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- China Import Iron Ore Spot $132.20/Metric Tonne +2.24%
- Citi US Economic Surprise Index 47.40 -3.2 points
- 10-Year TIPS Spread 2.48 +2 bps
Overseas Futures:
- Nikkei Futures: Indicating +32 open in Japan
- DAX Futures: Indicating +2 open in Germany
Portfolio:
- Higher: On gains in my retail, tech, medical and biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
