Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 112.0 -19.4%
- Total Put/Call .86 +4.88%
Credit Investor Angst:
- North American Investment Grade CDS Index 85.79 +.16%
- European Financial Sector CDS Index 125.71 +1.67%
- Western Europe Sovereign Debt CDS Index 101.51 -.59%
- Emerging Market CDS Index 193.86 +.89%
- 2-Year Swap Spread 13.5 +.75 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -19.0 +.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .07% unch.
- China Import Iron Ore Spot $153.30/Metric Tonne +2.34%
- Citi US Economic Surprise Index 34.10 -.6 point
- 10-Year TIPS Spread 2.48 +1 bp
Overseas Futures:
- Nikkei Futures: Indicating +102 open in Japan
- DAX Futures: Indicating +10 open in Germany
Portfolio:
- Higher: On gains in my retail/medical/tech/biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Euro-Area Manufacturing, Services Shrink More Than Estimated. European services and factory output
contracted more than initially estimated in December, adding to
signs a recession in the region may extend into this year. A
composite index based on a survey of purchasing managers in both
industries was revised down to 47.2 from an initial estimate of 47.3
published on Dec. 14, London-based Markit Economics said in a report today.
- Google(GOOG) Free to Extend Web Search Lead as U.S. Ends Probe.
Google Inc. (GOOG) is free to extend its dominance of the $50 billion
Internet-search market after U.S. regulators ended an investigation into
whether the
company unfairly disadvantaged competing websites by favoring its own
services in search results.
Wall Street Journal:
- Brazil to Ease Back on Stimulus Measures. Brazil's government plans to ease back on policies to weaken the
currency and lower interest rates in 2013 as economic growth starts to
recover after two years in the doldrums, Finance Minister Guido Mantega
said in an interview. "2013 will be calmer, with fewer measures because they've been done,"
Mr. Mantega said. "Monetary and exchange rate policies are now
adjusted."
- FDA Proposes Food-Safety Rules.
Federal regulators on Friday proposed new rules aimed at preventing
food-related illnesses, requiring that fruit and vegetable farmers keep
deadly bacteria out of their fields and subjecting processors to
stricter safety monitoring. The safety standards proposed by the Food and Drug Administration
will cover all aspects of growing and harvesting produce, including
crops like cantaloupes and lettuce, which have been the source of deadly
illness outbreaks in recent years. Facilities that use those raw crops
to make food like peanut butter will be ordered to implement
government-approved plans to keep bacteria out.
Barron's:
Reuters:
- Fund investors sought stocks ahead of U.S. fiscal deal -EPFR. Investors poured $5.06 billion
into stock funds worldwide in the latest week, as the appetite
for risk rose after U.S. lawmakers cobbled together a
last-minute tax deal that avoided the worst of the so-called
fiscal cliff, data from EPFR Global showed on Friday.
- Bullard says Fed could pause QE this year. The Federal Reserve will be in a
position to think about halting its large-scale asset purchases
this year if the U.S. economy improves, a top central bank
official said on Friday, fingering a 7.1-percent unemployment
rate as a possible goal.
Style Underperformer:
Sector Underperformers:
- 1) Steel -1.2% 2) Gold & Silver -1.05% 3) Computer Services -.52%
Stocks Falling on Unusual Volume:
- BBG, CSTR, FDS, TNAV, SNI, BSBR, ULTA, ENDP, BWS and FINL
Stocks With Unusual Put Option Activity:
- 1) UPL 2) HIG 3) MET 4) UA 5) MOS
Stocks With Most Negative News Mentions:
- 1) ARAY 2) IPGP 3) NYT 4) BWS 5) GM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +1.59% 2) Airlines +1.46% 3) Networking +1.54%
Stocks Rising on Unusual Volume:
- HNR, SCTY, APKT, KKD and ROVI
Stocks With Unusual Call Option Activity:
- 1) VRNG 2) BSX 3) IAU 4) GDXJ 5) CTL
Stocks With Most Positive News Mentions:
- 1) AVP 2) JNJ 3) AN 4) APKT 5) SFLY
Charts:
Evening Headlines
Bloomberg:
- Obama Catastrophe With Congress Looms as Investors Show No Alarm.
Fresh from a budget fight so raw that the Republican speaker of the U.S.
House cursed the Democratic leader of the Senate outside the Oval
Office, President Barack Obama and Congress are heading for an even
bigger confrontation over raising the nation’s debt limit.
- Gold Set for Worst Run Since ’04 as Fed Signals End of Purchases. Gold tumbled, poised for the longest run of weekly losses since 2004,
as Federal Reserve policy makers said that they’ll probably end asset
purchases this year and investors cut holdings by the most since May.
Silver slumped to the lowest since August while palladium and platinum
dropped. Spot gold fell as much as 1.1 percent to $1,646.15 an
ounce, the lowest since Dec. 21, and was at $1,646.75 at 9:35 a.m. in
Singapore. Bullion is 0.5 percent lower this week, set for a sixth
weekly drop.
- Hong Kong Puts Hit Five-Year Low Amid Economic
Recovery: Options. The cost of bearish bets on Hong Kong stocks has
fallen to a five-year low as data show China's economy is gaining
momentum and the Hang Seng Index climbs to the highest level since June
2011. Puts with an exercise price 10% below the Heng Seng Index cost
3.57 points more than calls betting on a 10% rally. The price
relationship known as skew dropped to 2.06 on Dec. 27, its lowest level
since February 2008.
- Moody’s, S&P, Fitch Must Face Fraud Claims in SIV Suit. Moody’s
Corp. (MCO), Standard & Poor’s and Fitch Inc. must face fraud
claims in an investor lawsuit over their ratings of a structured
investment vehicle called
Rhinebridge that collapsed in 2007, a judge ruled. Morgan Stanley(MS), which helped set up the investment, also
lost a bid to dismiss claims of aiding and abetting fraud in a
ruling today by U.S. District Judge Shira Scheindlin in
Manhattan. Scheindlin narrowed the suit, dismissing other
claims.
- The 100 Top-Performing Large Hedge Funds. The February 2012 issue of Bloomberg Markets magazine contains our
annual rankings of the world's richest hedge funds. The following 100
comprise our list of best-performing hedge funds managing $1 billion or
more.
- The Great Citigroup(C) Hedge Fund Giveaway. Among Vikram Pandit’s last jobs as Citigroup’s
(C) chief executive officer was deciding the fate of its hedge fund
unit, which employs some colleagues from his days at Morgan Stanley (MS)
and Old Lane Partners. Citi needs to get out of the business to comply
with the Volcker rule’s restrictions on banks’ hedge fund investments
and proprietary trading.
- Coinstar(CSTR) Names CFO Scott Di Valerio CEO as Davis Steps Down.
- Al Gore Getting $70 Million From Qatar-Funded Al Jazeera. Al Gore, who shared the 2007 Nobel
Peace Prize for his fight against global warming, may gross
about $70 million from the sale of his Current TV network to Al
Jazeera, the cable channel funded in part by oil-rich Qatar. Al Jazeera will pay about $500 million for Current TV,
including the stake held by Gore, 64, according to two people
with knowledge of the deal. The network is one of dozens of
investments made by the former vice president since he lost the
2000 presidential race by a slim margin. “It’s reeking with irony,” said Jeff Sonnenfeld, senior
associate dean at the Yale School of Management, who studies
corporate governance. “It seems to be at least a paradox in
terms of his positions on sustainability and geopolitics.”
- Record India Deficit May Limit Rate Cuts as Rupee Drops: Economy. India’s
record current-account deficit threatens to weigh on the rupee and curb
the magnitude of interest-rate cuts forecast to begin this month in
support of
government policies seeking faster growth.
Wall Street Journal:
- New Congress Faces Same Partisan Divisions. Battles Over Government's Cost and Size Are Likely to Dominate Coming Months.
- Rivals Object to Wal-Mart(WMT) Ads. An aggressive Wal-Mart Stores Inc. advertising campaign that claims
better prices than specific, named competitors has rankled rivals, which
have complained to attorneys general in more than half a dozen states. The targeted retailers, including Toys "R" Us Inc., Best Buy Co. and
several regional supermarket chains, claim Wal-Mart cites inaccurate
prices and compares differing products, such as laptop computers with
separate specifications.
- Health-Care Unions Will Join Forces. The nation's largest nurses union said Thursday it would team up
with a union representing other health-care workers, seeking to make the
combined entity the dominant labor group in the fast-growing
health-care sector. The groups' decision to join forces intensifies
their rivalry with the powerful Service Employees International Union.
The California Nurses Association and the National Union of Healthcare
Workers said the affiliation was aimed at preventing hospital chains
from scaling back benefits for employees and fighting for workplace
standards needed to improve patient care.
- Investors Sour on Pro Stock Pickers. Investors are jumping out of mutual funds managed by professional
stock pickers and shifting massive amounts of money into lower-cost
funds that echo the broader market. Through November, investors
pulled $119.3 billion from so-called actively managed U.S. stock funds
in 2012, the biggest yearly outflow since 2008, according to the latest
data from research firm Morningstar Inc.
- Noonan: There's No 'I' in 'Kumbaya'. Obama doesn't seem to have it in him to make a deal.
- Strassel: The Debt-Ceiling Fight Will Be Dirty. The GOP thinks it will win, but the party's strategy is far from clear.
Fox News:
- Exclusive: Radical American Cleric may have booked pre-9/11 flights for hijackers, FBI documents show. The FBI suspected within days of the Sept. 11, 2001, terrorist
attacks that the American Muslim cleric Anwar al-Awlaki may have
purchased tickets for some of the hijackers for air travel in advance of
the attacks, according to newly released documents reviewed exclusively
by Fox News. The purpose of these flights remains unclear, but the 9/11 Commission
report later noted that the hijackers had used flights in the lead-up
to the attacks to test security and surveillance.
CNBC:
Zero Hedge:
Business Insider:
IBD:
Washington Post:
- White House seems poised to retool deportation laws. The
Obama administration’s decision this week to ease visa requirements for
hundreds of thousands of illegal immigrants represents its latest move
to reshape immigration through executive action, even as the White House
gears up for an uncertain political fight over a far-more-sweeping
legislative package in the months ahead.
NY Times:
- Gore Went to Bat for Al Jazeera, and Himself.
Al Gore’s Current TV was never popular with viewers, but it was a hit
where it counted: with cable and satellite providers. When he co-founded
the channel in 2005, Mr. Gore managed to get the channel piped into
tens of millions of households — a huge number for an untested network —
through a combination of personal lobbying and arm-twisting of industry
giants. He called on those skills again after deciding in December to
sell Current TV to Al Jazeera for $500 million. To preserve the deal —
and the estimated $100 million he would personally receive — he went to
some of those same distributors, who were looking for an excuse to drop
the low-rated channel, and reminded them that their contracts with
Current TV called it a news channel. Were the distributors going to say
that an American version of Al Jazeera didn’t qualify, possibly invoking
ugly stereotypes of the Middle Eastern news giant?
Breitbart.com:
The Blaze:
Reuters:
Telegraph:
Want China Times:
- Burgeoning financial products inflate China's shadow banking system. The size of the shadow banking system in China is said to be larger than
the estimates of international financial institutions and surged
rapidly last year to 15 to 17 trillion yuan (US$2.4-$2.7 trillion) as
the country introduced many financial and trusts products, significantly
increasing credit risks.
Economic Information Daily:
- China Audit Ignores Billions of Yuan of Local Government Projects. A central government audit of local government debt doesn't include hundreds of billions yuan worth of construction projects and may become a prominent risk, citing a National Development and Reform Commission researcher.
Evening Recommendations
Morgan Stanley:
- Upgraded (PKI) to Overweight, target $38.
Keefe Bruyette:
- Downgraded (BXS) to Underperform, target $12.
Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 101.5 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 78.75 -1.75 basis points.
- NASDAQ 100 futures -.08%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for December is estimated at 153K versus 146K in November.
- The Unemployment Rate for December is estimated at 7.7% versus 7.75 in November.
- Average Hourly Earnings for December are estimated to rise +.2% versus a +.2% gain in November.
10:00 am EST
- Factory Orders for November are estimated to rise +.4% versus a +.8% gain in October.
- ISM Non-Manufacturing for December is estimated to fall to 54.0 versus 54.7 in November.
11:00 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-1,000,000 barrels versus a -586,000 barrel decline the prior week.
Gasoline supplies are expected to rise by +2,200,000 barrels versus a
+3,782,000 barrel gain the prior week. Distillate supplies are estimated
to rise by +1,250,000 barrels versus a +2,423,000 barrel gain the prior
week. Finally, Refinery Utilization is estimated to rise by +.5% versus
a -1.2% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bullard speaking, Fed's Plosser speaking, Fed's Yellen speaking and the Eurozone Services PMI report could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 139.0 +7.75%
- Total Put/Call .78 -18.75%
Credit Investor Angst:
- North American Investment Grade CDS Index 85.20 +.12%
- European Financial Sector CDS Index 123.66 -2.35%
- Western Europe Sovereign Debt CDS Index 101.61 -3.23%
- Emerging Market CDS Index 191.92 -1.57%
- 2-Year Swap Spread 12.75 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -19.5 unch.
Economic Gauges:
- 3-Month T-Bill Yield .07% +1 bp
- China Import Iron Ore Spot $149.80/Metric Tonne +3.38%
- Citi US Economic Surprise Index 34.70 +1.6 points
- 10-Year TIPS Spread 2.47 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating +390 open in Japan
- DAX Futures: Indicating +1 open in Germany
Portfolio:
- Higher: On gains in my retail/medical sector longs and index hedges
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
