Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -1.40% 2) Alt Energy -1.34% 3) Gaming -.70%
Stocks Falling on Unusual Volume:
- TIF, CHK, ABG, PWE, WMT, LVLT, BANR, ASNA, HLF, MSM, UNXL, SSRI, ROG, FBC, HAYN, ATLS, CALL, RRGB, TXI, CUB, WCC, NILE, VECO, USNA, KMT, RGR, TISI, TROX, BIIB, AEO and WCC
Stocks With Unusual Put Option Activity:
- 1) SVU 2) ARO 3) HL 4) NFX 5) TIF
Stocks With Most Negative News Mentions:
- 1) MGM 2) CSX 3) WMT 4) TXI 5) CHK
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.86% 2) Construction +1.06% 3) Oil Tankers +1.04%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) AMAT 2) RPRX 3) SVU 4) ETFC 5) FXY
Stocks With Most Positive News Mentions:
- 1) ZLC 2) DAL 3) AEO 4) URBN 5) BJRI
Charts:
Evening Headlines
Bloomberg:
- Draghi Spared as Confidence Mood Swing Quells ECB Rate-Cut Talk. Mario
Draghi might be spared from having to make the thorniest of
interest-rate cuts. Improving confidence indicators have eased pressure
on the European Central Bank president to reduce the benchmark rate from
a record low, a move fraught with the unknown consequences of possibly
pushing the deposit rate below zero. While officials discussed a cut
in borrowing costs last month, only five out of 55 economists in a
Bloomberg survey predict that outcome today. The rest see the benchmark
staying at a record-low 0.75 percent.
- Hollande Faces Having to Force Labor Revamp as Talks Splutter. President
Francois Hollande may be forced to unilaterally overhaul French labor
rules as employers and unions struggle to find common ground in final
negotiations today and tomorrow. Hollande, who called for the talks
when he took office last year, wants the parties to find ways to give
employers more flexibility when the economy slows while also improving
job security sought by unions. The Socialist president has
repeatedly said he’ll act on the issue if they fail to reach an
accord on their own.
- Peugeot Battles Cash Crunch as European Slump Continues. PSA
Peugeot Citroen (UG), more exposed to slumping European auto demand
than any other carmaker, will probably see its cash cushion shrink in
2013 with industrywide
sales in the region due to contract for the sixth straight year. Peugeot will run through about 1.7 billion euros ($2.2
billion) of its 8 billion euros in cash reserves in 2013,
according to estimates by CM-CIC Securities analyst Florent Couvreur. The burn rate may bring the carmaker closer to a
liquidity crunch as its market share erodes further.
- Spain’s Shrinking Bank Network Leaves CaixaBank Top-Heavy. CaixaBank
(CABK) SA is among lenders that look increasingly bloated as Spain’s
economic slump adds pressure on banks to cut branches after the busted
credit boom.
- China Shipyards Set to Spark Price War Among Rigmakers. China’s
shipbuilders are set to spark a price war in the oil-rig market. With
orders for new ships plunging to an eight-year low in 2012, China
Rongsheng Heavy Industries Group Holdings Ltd. (1101) and its local
rivals are foraying into the offshore business, lured by a market that
will reach about $328 billion in 2017. The new entrants are lowering
prices to grab contracts, hurting margins at Singapore-based Keppel
Corp. (KEP) and Sembcorp Marine Ltd. (SMM), the world’s two-biggest rig
makers. “It’s like moving from one bottomless pit to another,” said
Park Moo Hyun, an analyst at E*Trade Securities Co. in Seoul. “Chinese
shipyards are competitively trying to get into what they see as a
lucrative business. But the consequence of that is they could end up
distorting the whole market.”
- Lew Taking Over at Treasury Puts Perennial Aide at Head.
- U.S. Labor Chief Solis Resigns to Be Closer to Family. U.S. Labor Secretary Hilda Solis, who
started her job four years ago when unemployment was at a 15-
year high, resigned, saying she wanted to be closer to family
and friends. “I have decided to begin a new future, and return to the
people and places I love and that have inspired and shaped my
life,” Solis, 55, said today in a letter to the more than
17,000 employees in the agency.
- California Cities Sue Banks Over Libor Rates, Law Firm Says. Eight California counties and public
entities sued UBS AG (UBSN), Barclays Plc (BARC) and 20 other banks alleging
they lost millions of dollars because the financial institutions
manipulated the benchmark Libor rate. The plaintiffs claim they were cheated out of higher
interest payments on investments such as interest-rate swaps and
corporate bonds tied to Libor.
Wall Street Journal:
- BATS Says 'System Issue' Has Led to Pricing Problems Over Past 4 Years. Stock-exchange operator BATS Global Markets Inc. said Wednesday that a
"system issue" has allowed hundreds of thousands of transactions to be
executed at prices that weren't the regulator-required best ones
available at the time.
At issue are transactions in which investors "short" shares, or bet a stock will fall.
- Bank Made Huge Bet, and Profit, on Libor. Deutsche
Bank(DB) made at least €500 million ($654 million) in profit in 2008
from trades pegged to the interest rates under investigation by
regulators
world-wide, internal bank documents show. The
German bank's trading profits resulted from billions of euros in bets
related to the London interbank offered rate, or Libor, and other global
benchmark rates.
- Henninger: Hurricane Christie. The governor howls at the Republicans who were trying to help him.
- Rove: A GOP Strategy for the Debt-Ceiling Fight. The House should pass a bill pairing spending cuts with a dollar-for-dollar debt-ceiling increase.
Fox News:
- Watchdog calls tax code 'unconscionable burden,' asks Congress to reform system. The country’s top taxpayer advocate urged Congress on Wednesday to
simplify the tax code, saying it is the most serious problem facing
taxpayers and that individuals and businesses spend about 6.1 billion
hours annually complying with tax-filing requirements. The analysis and recommendation are included in the 2012 report to
Congress by the national taxpayer advocate, the IRS' internal watchdog.
CNBC:
Zero Hedge:
Business Insider:
CNN:
- Doctors looking for an out. Some
doctors are quitting medicine after they find a new passion; others are
burned out and fed up with shrinking reimbursements or being
overloaded with patients.
Morningstar:
- Riskiest Subprime Auto Bonds Shift Into Higher Gear. Santander Consumer USA on Wednesday sold $1.25 billion in asset-backed securities at record low yields for the
subprime auto lender, as investors bet eroding loan quality wouldn't produce losses on their bonds, while paying
relatively higher yields. Demand was strongest on some of the lowest-rated debt, where investor orders for more than seven times what was
available let dealers cut yields during a two-day marketing period.
Reuters:
- Afghans say total U.S. pullout would trigger disaster. Afghan
lawmakers said on Wednesday
disaster and civil war would follow if Washington pushed ahead
with a suggestion to withdraw all its troops from the country after
2014. The White House said a day earlier it was considering the
so-called "zero option" of a complete pullout - despite earlier
recommendations from the top military commander in Afghanistan to keep
soldiers there to help the government. That option and the angry
reaction from Afghan officials are likely to dominate talks between U.S.
President Barack Obama and his Afghan counterpart Hamid Karzai in
Washington on Friday. The meeting was already likely to be tense, given ongoing
strains in their relationship over the war. "If Americans pull out all of their troops without a plan,
the civil war of the 1990s would repeat itself," said Naeem
Lalai, an outspoken lawmaker from volatile Kandahar province,
the birthplace of the Taliban. "It (full withdrawal) will pave the way for the Taliban to
take over militarily," Lalai told Reuters.
- China exports pick up more than expected in December.
- Spain starts heavy borrowing year with crisis-clause bond. Spain's
first debt sale of 2013 is likely to attract enough investors on
Thursday to keep the country's borrowing costs down despite its heavy
financing needs and the prospect of sustained economic recession.
Financial Times:
- UBS’s Orcel admits banks must change. Bankers
have become too arrogant and the industry must change, the chief
executive of UBS’s investment bank told British lawmakers on Wednesday.
Telegraph:
Evening Recommendations
Citigroup:
- Rated (AFL) Buy, target $62.
- Rated (HIG) Buy, target $27.
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 81.0 unch.
- NASDAQ 100 futures +.28%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 365K versus 372K the prior week.
- Continuing Claims are estimated to fall to 3228K versus 3245K prior.
10:00 am EST
- Wholesale Inventories for November are estimated to rise +.2% versus a +.6% gain in October.
Upcoming Splits
Other Potential Market Movers
- The ECB rate decision, Fed's Kocherlakota speaking, Fed's Bullard speaking, Fed's George speaking, China New Loan/Money Supply/Trade data, Spanish 10Y bond auction, BoE rate decision, 30Y T-Note auction, Japan Trade data, (HLF) analyst day, weekly EIA natural gas inventory report, JOLTs Job Openings report for November, RBC Consumer Outlook Index for January, Bloomberg Economic Survey for January, weekly Bloomberg Consumer Comfort Index, (KBR) earnings guidance and the (CVX) Q4 interim update could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and automaker 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: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 96.0 -1.3%
- Total Put/Call .85 -11.46%
Credit Investor Angst:
- North American Investment Grade CDS Index 86.71 +1.37%
- European Financial Sector CDS Index 124.21 +1.05%
- Western Europe Sovereign Debt CDS Index 101.80 +.45%
- Emerging Market CDS Index 207.51 +1.16%
- 2-Year Swap Spread 13.50 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -20.0 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- China Import Iron Ore Spot $158.50/Metric Tonne unch.
- Citi US Economic Surprise Index 30.0 -1.1 points
- 10-Year TIPS Spread 2.52 +2 bps
Overseas Futures:
- Nikkei Futures: Indicating +57 open in Japan
- DAX Futures: Indicating -6 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical/biotech/tech sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Merkel Confronts Growing Skepticism on Bailout Aid to Cyprus. Chancellor Angela Merkel confronted a
growing chorus of skepticism from inside and outside Germany’s
coalition on bailout financing for Cyprus, possibly endangering
her majority among lawmakers who will have to approve any aid. Rainer Bruederle, the parliamentary leader for Merkel’s
Free Democratic coalition partner, told Bild newspaper he sees
no majority in the lower house as long as German taxpayers have
the impression that they’re bolstering tax evaders. He echoed
statements from opposition Social Democratic Chairman Sigmar Gabriel, who told Sueddeutsche Zeitung newspaper the SPD won’t
support a Cyprus bailout in its current form. “There are too many question marks surrounding Cyprus,”
Bruederle told Bild in an interview today. “From what is known
currently, I don’t see a majority for financial aid.”
- Iron Ore Seen Set for Bear Market as Restocking Rally Fades.
Iron ore, which posted the biggest quarterly climb on record in the
final three months of 2012, may extend gains from a 14-month high as
Chinese mills restock, then tumble into a bear market, according to
Deutsche Bank AG.
Prices may rise to $170 a ton in the first half on demand
in the biggest buyer, before falling to less than $120 as supply
expands, Deutsche Bank said in a report.
Wall Street Journal:
- Once-Lively Square Is a Center of Greek Woe. Once the vibrant commercial heart of Athens, the capital's central
Omonia Square now is ringed by shuttered hotels and vacant shops and
haunted by drug dealers, addicts and prostitutes, making it a national
symbol of despair and social collapse.
- CBO: Ending Corporate Tax Deferral Could Raise $100 Billion. A new Congressional Budget Office study throws some cold water on the
idea of overhauling U.S. corporate tax policy to make it more like other developed countries’ tax policies. The
study suggests that the current U.S. system is bad enough, but some of
the alternatives being advanced by businesses likely would be worse.
Fox News:
- Biden suggests White House could act without Congress as part of gun control plan. Vice President Biden suggested Wednesday that the White House could
take unilateral action on gun control, as he kicked off a round of
meetings aimed at finding ways to curb gun violence. The vice president met Wednesday with gun-safety and victims groups,
saying he is "determined" to take "urgent action" to address gun
violence. "This is not an exercise in photo opportunities or just getting to
ask you all what your opinions are. We are vitally interested in what
you have to say," Biden said.
- Criticism, concern about Hagel nomination spreads beyond Capitol Hill. The furor over former Sen. Chuck Hagel’s nomination for secretary of
defense is rippling beyond Capitol Hill as pro-Israeli and gay-rights
groups join in opposition. The former Nebraska senator and decorated Vietnam War veteran is
facing criticism for a years-old anti-gay comment and his political
views -- including those that suggest some tension with Israel,
considered the United States’ closest Middle East ally.
CNBC:
- US Stocks Could See a Correction: Wien. U.S.
stocks may have closed at five year highs last week, but a long-time
market watcher told CNBC on Wednesday that the S&P 500 Index could
see a correction from current levels before recovering by year's end."I
have a bearish outlook," said Byron Wien, BlackstoneAdvisory Partners
vice chairman. "The market will have a swoon here — trade at
1,300, down 10 percent from where it is right now.
Reuters:
- Germany may slip into recession, Europe weakens: GM CEO.
European auto sales will weaken further this year and Germany may be
slipping into recession, General Motors Co's top executive said, making
the U.S. automaker's task of turning around its money-losing
Opel unit in that region more difficult. However, GM Chief Executive Dan Akerson said on Wednesday
the company was cutting losses at Germany-based Opel as it aims
to achieve its previously stated target of returning the unit to
profits by mid-decade. GM previously said it expected a 2012
operating loss in Europe of as much as $1.8 billion.
Xinhua:
- Commentary: Japan's envisaged "warning shots" dangerous, irresponsible. Japan is reportedly scheming to fire "warning shots"
if it encounters China's surveillance plane over the Diaoyu Islands.
Such a provocative move is dangerous and irresponsible, and will
definitely heighten the tension over the Diaoyu Islands issue and tip
Sino-Japanese relations into a disastrous abyss. It is the latest
provocation by the the newly installed Shinzo Abe
administration to test the response as well as the tolerance of China
and of the broader international community. Over the Diaoyu Islands
issue, Japan has already made a mistake by
attempting to challenge the international order established after the
WWII. Now by talking about "warning shots," it slipped further into the
wrong direction. There were other steps taken by the Abe administration
that have severely damaged the mutual trust between Japan and China.
Asharq al-Awsat:
- The Muslim Brotherhood seeks to undermine Gulf governments and sully the reputation of its rulers while Iran's danger lies in its nuclear program and its interference in Gulf affairs, Dubai Police Chief Dahi Khalfan said.
Style Underperformer:
Sector Underperformers:
- 1) Education -5.43% 2) Coal -1.72% 3) Restaurants -.75%
Stocks Falling on Unusual Volume:
- CRK, GDP, AUQ, BUD, STZ, BAC, CEL, FHN, LVLT, FFBC, XTEX, MG, MT, FMS, APOL, CALL, INT, NUS, PLOW, DBD, USNA, BUD, ESI, APU, FNSR, SYY, STRA, MUSA, GRMN, CRK, DV, DGIT, NTSP, UNG and LOPE
Stocks With Unusual Put Option Activity:
- 1) PCS 2) APOL 3) STZ 4) FXE 5) JDSU
Stocks With Most Negative News Mentions:
- 1) WLT 2) MS 3) JCP 4) C 5) CAR
Charts:
