Style Underperformer:
Sector Underperformers:
- 1) Computer Hardware -.70% 2) Papers -.61% 3) Semis -.60%
Stocks Falling on Unusual Volume:
- LEAP, BBCN, CBSH, BODY, SYA, MFC, HL, GIVN, GMAN, LULU, ARMH, FISV, SAP, PSMI, LEN, LPL, NILE, WCG, MX, HTHT, INFY, HDB, SSL, AAPL, IMOS, SYA, AAWW, ED, ISRG and ALNY
Stocks With Unusual Put Option Activity:
- 1) XLB 2) XLI 3) KBH 4) USB 5) GT
Stocks With Most Negative News Mentions:
- 1) ALTR 2) AFL 3) REGN 4) MS 5) MFLX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Education +1.29% 2) Gold & Silver +.64% 3) Hospitals +.34%
Stocks Rising on Unusual Volume:
- EXPR, SNTS, QLGC and SPLK
Stocks With Unusual Call Option Activity:
- 1) EXPR 2) FXY 3) DELL 4) DLTR 5) CMCSK
Stocks With Most Positive News Mentions:
- 1) M 2) LMT 3) JEC 4) UPS 5) CVX
Charts:
Evening Headlines
Bloomberg:
- Draghi’s Bond Rally Masks Debt Doom Loop Trapping Spain. The bond rally that has sent Spanish
borrowing costs to 10-month lows has distracted attention from
the nation’s growing debt pile. Spain’s budget deficit probably exceeded 9 percent for a
fourth year in 2012 as Europe’s highest unemployment rate, a
third recession in four years and the cost of bailing out its
banks offset almost all of the government’s 62 billion euros
($83 billion) of spending cuts and tax increases, according to
economists at Societe Generale SA (GLE), Lombard Street Research and
the Madrid-based Applied Economic Research Foundation. Total debt will reach 97 percent of gross domestic product
this year, the International Monetary Fund forecasts. “This is a classic example of the doom loop,” Societe
Generale’s London-based chief European economist, James Nixon,
said in a Jan. 10 telephone interview. “They just aren’t making
any progress.”
- Berlusconi Gains in Polls as Italians Swayed by Media Blitz. Public support for Berlusconi’s coalition rose to 27.9
percent from 25.3 percent a month ago, according to a poll by
EMG released by television station La 7 late yesterday. Front-
runner Pier Luigi Bersani’s coalition of center-left parties
slipped to 37.4 percent from 40.3 percent.
- RBS Said to Face $800 Million Libor Fine as Early as Next Week. Royal
Bank of Scotland Group Plc may pay as much as 500 million pounds ($804
million) in fines next week to settle allegations traders tried to rig
interest rates,
two people with knowledge of the matter said.
- KeyBanc
Cuts 2013 U.S. Steel-Scrap Forecast on Lower Demand. Scrap-price outlook
lowered to $360 a long ton, from $410-$415, KeyBanc Capital Markets
analysts led by Cleveland-based Mark Parr said today. Lower prices for
seaborne iron ore and "tepid" demand for scrap exports signal lower
prices, KeyBanc said.
- Bernanke to Scrutinize QE Costs as Fed Assets Near Record. Federal Reserve Chairman Ben S. Bernanke indicated he will closely scrutinize the potential
costs of asset purchases aimed at spurring economic growth as
the Fed’s balance sheet approaches $3 trillion. “So far, we think we are getting some effect, it is kind of
early,” Bernanke said today at the University of Michigan’s
Gerald R. Ford School of Public Policy in Ann Arbor. “We are
going to continue to assess how effective” the program is
“because it is possible that as you move through time and the
situation changes that the impact of these tools could vary.”
- Bernanke Sees ’No Completely New’ Stimulus Method for Fed. Federal Reserve Chairman Ben S. Bernanke said he isn’t aware
of any new stimulus tool for the central bank to use to try to boost
growth. “As far as I’m aware, there’s no completely new method
that we haven’t” already tapped, Bernanke said today in Ann Arbor,
Michigan. The Fed lowered its benchmark interest rate to near
zero in December 2008. Since doing so, its two main approaches for
further easing have been communications about the outlook for interest
rates and asset-purchase programs, both of which the central bank has
used, Bernanke said.
- IMF’s Zhu Says Japanese Debt Overhang Is Getting More Serious. International Monetary Fund official
Zhu Min said Japan’s debt burden is becoming “more serious” as
the government takes extra steps to stimulate growth in the
world’s third-biggest economy. “The debt overhang is becoming more serious so they need
to go further in fiscal consolidation,” Zhu, a deputy managing
director at the IMF, said in an interview in Hong Kong today,
where he’s attending the Asian Financial Forum. Japan announced 10.3 trillion yen ($115 billion) in fiscal
stimulus last week as Prime Minister Shinzo Abe followed through
on election pledges to weaken the yen, counter deflation and
spur economic growth. The risk is that the nation’s debt burden,
estimated by the IMF at 237 percent of gross domestic product
last year, will lead to a surge in government bond yields.
- Yen Rallies as Japan Official Amari Comments on Currency. The yen rose against its major peers
after comments by Japan’s economy minister stoked speculation
the nation won’t try to spur further weakness in its currency. The yen ended four days of declines against the dollar
after Akira Amari said an excessively weak currency has negative
effects on livelihoods. The dollar traded near a 10-month low
against the euro as Treasury Secretary Timothy F. Geithner warned that
failure to raise the debt ceiling by early March would “impose severe
economic hardship.” “The world has gone massively short yen on the
idea that Japan is going to be more aggressive with its stimulus under
the new prime minister,” said Imre Speizer, a strategist in Auckland at
Westpac Banking Corp. (WBC) “Comments like Amari’s are
likely to spook those holding yen shorts.”
- Morgan Stanley(MS) Said to Pare Asia Investment Bank Jobs by 15%.
- Blavatnik Says JPMorgan(JPM) ‘Stuffed’ Fund With Risky Mortgages.
JPMorgan Chase & Co. filled a fund started by billionaire Leonard
Blavatnik with risky mortgage securities instead of the conservative
investments it was told to make, lawyers for Blavatnik told a New York
state judge today. Blavatnik, 55, sued New York-based JPMorgan in
New York state Supreme Court in June 2009, accusing the biggest U.S.
bank by assets of putting more money into mortgage securities than his
investment guidelines allowed.
- Lululemon(LULU) Drops as Quarterly Outlook Trails Analysts’ Estimates. Lululemon Athletica Inc. slid by as
much as 10 percent after the Canadian yoga-wear retailer
forecast fourth-quarter sales that trailed analysts’ estimates. The shares fell 7.7 percent to $66.70 at 4:38 p.m. in New
York after earlier dropping to $65. The Vancouver-based company,
which gained 63 percent in 2012, closed at $72.30 today.
- Apple(AAPL) IPhone Suppliers Decline on Report Orders Cut by 50%.
Wall Street Journal:
- Obama Escalates Debt Fight. President Warns Congress He Won't Pay 'Ransom'; GOP Insists on Spending Cuts.
President Barack Obama, facing a battle over raising the U.S. borrowing
limit, made clear Monday that he sees no alternative to Congress voting
for an increase and said that not doing so would be "irresponsible" and
"absurd." Mr. Obama's confrontational
message—that a debate over the debt limit was already harming the
economy and could push the U.S. into a recession—was primarily aimed at
Republicans, who plan to use the debt-limit vote as leverage to extract
cuts in federal spending. But it also served as a warning to Democrats
who have pressed him to increase the borrowing limit unilaterally by
invoking executive powers.
- Wall Street Pay Gets Tougher Look. Hedge-Fund Manager Loeb Takes Aim at Morgan Stanley(MS)
Compensation Levels.
- Hedge Funds' Manhattan Migration. Hedge-fund managers have long viewed New York as a prime location for
business because of its appeal to employees and its status as one of
the world's financial centers. It doesn't hurt that many managers call
the island home. But in a difficult fundraising environment that favors funds that
already oversee billions of dollars, startup managers have had to work
harder to get noticed. More are betting they can catch the eye of
potential investors by helping them avoid the journey up the New England
Thruway.
- CBOE Revamping Board to Drop Traders. The biggest U.S. stock-options exchange is cutting ties between its
board and traders on its markets following a federal probe into the
exchange's regulation of its members, according to people close to the
situation. CBOE Holdings Inc. plans to revamp its 15-member board
by replacing three directors who also run trading firms with existing
board members that have no direct ties to the options business, while
adding several new directors.
- Behind Lance Armstrong's Decision to Talk.
Last month, Lance Armstrong boarded a plane for Denver to do something
several of his lawyers had advised against: sitting down for a private
conversation with the head
of the U.S. Anti-Doping Agency.
- The Next Tax Increase. The new tax hike is barely law and Obama already wants more. In case you missed it, President Obama held a press conference Monday to
make essentially two points: He won't negotiate with Republicans over
raising the federal debt limit, and if Republicans want any spending
cuts at any time in the next four years they'll have to raise taxes
along with it. He won, so get used to it, chumps.
Fox News:
- CFTC Follows SEC in Permitting Offsets for Cleared CDS at ICE. A federal regulator gave the green light Monday for investors clearing
credit derivatives trades with a unit of IntercontinentalExchange Inc.
(ICE) to offset certain positions in the clearinghouse, a move that is
expected to lead to savings for traders.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Japan-China tension weighs on Nissan investments. Nissan Motor Co.
will remain cautious about future Chinese investments including Infiniti
brand production until the country's relations with Japan improve, Chief Executive Carlos Ghosn said on Monday. Ghosn
was speaking at the Detroit auto show after the three main Japanese
automakers all said an anti-Japan consumer backlash continued to depress
their Chinese sales by between 16 and 30 percent. "Unless there's a
complete normalization between the two countries, every single
investment decision is going to have to be weighed" against the risk of
further disruption, the Nissan chief told Reuters in an interview.
- Bremmer: Nasty economic battle looms for China & Japan. (video) Risk expert and Eurasia Group President Ian Bremmer says Japan and
China have switched places as the world’s second and third largest
economies and “ hate each other.” Bremmer adds with growing nationalism
in each country and Japan’s position as a key U.S. alley, it’s one of
the biggest financial risks of 2013.
Financial Times:
- EU berates China over steel subsidies. The
European Commission has concluded that China is providing illegal
subsidies to its steel manufacturers, paving the way for European
companies to seek higher import tariffs on a wide range of Chinese
products. The EU executive arm said Beijing was helping makers of organic
coated steel – used in construction and to make household appliances –
to obtain materials at below market prices, according to a report
obtained by the Financial Times.
Telegraph:
Evening Recommendations
CSFB:
- Rated (INFI) Outperform, target $42.
Night Trading
- Asian equity indices are -.75% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 104.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 83.50 -1.25 basis points.
- NASDAQ 100 futures -.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (LEN)/.45
- (CBSH)/.72
- (FRX)/-.08
- (IBKR)/.21
- (LLTC)/.39
Economic Releases
8:30 am EST
- Empire Manufacturing for January is estimated to rise to 0.0 versus -8.1 in December.
- Advance Retail Sales for December are estimated to rise +.2% versus a +.3% gain in November.
- Retail Sales Less Autos for December are estimated to rise +.2% versus unch. in November.
- Retail Sales Ex Autos & Gas for December are estimated to rise +.4% versus a +.7% gain in November.
- The Producer Price Index for December is estimated to fall -.1% versus a -.8% decline in November.
- The PPI Ex Food & Energy for December is estimated to rise +.2% versus a +.1% gain in November.
10:00 am EST
- Business Inventories for November are estimated to rise +.3% versus a +.4% gain in October.
Upcoming Splits
- (HEP) 2-for-1
- (SGA) 4-for-3
Other Potential Market Movers
- The Fed's Plosser speaking, Fed's Kocherlakota speaking, Fed's Rosengren speaking, Eurozone trade data, Eurozone inflation data, weekly retail sales reports, Needham Growth Conference, Deutsche Bank Auto Industry Conference and the (FB) speak event 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 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: Modestly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 98.0 -7.55%
- Total Put/Call .80 +12.68%
Credit Investor Angst:
- North American Investment Grade CDS Index 89.16 +2.25%
- European Financial Sector CDS Index 131.58 +3.15%
- Western Europe Sovereign Debt CDS Index 98.90 +1.0%
- Emerging Market CDS Index 215.81 +.14%
- 2-Year Swap Spread 13.25 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -17.025 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- China Import Iron Ore Spot $154.60/Metric Tonne -.19%
- Citi US Economic Surprise Index 8.90 -2.0 points
- 10-Year TIPS Spread 2.53 +2 bps
Overseas Futures:
- Nikkei Futures: Indicating +209 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech sector longs and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- Euro-Area Industrial Output Unexpectedly Declined in Nov.Euro-area industrial production
unexpectedly fell in November as declines in Italy and Spain
offset a return to growth in Germany. Output in the 17-nation euro area dropped 0.3 percent from October, when it declined a revised 1 percent, the European Union’s statistics office in Luxembourg said today. Economists had forecast an increase of 0.2 percent, according to the median of 37 estimates in a Bloomberg News survey. Output
fell 3.7 percent from the year-earlier period. Industrial output in
Germany, Europe’s largest economy, increased 0.1 percent after a 2
percent decline in October,
today’s report showed. French production rose 0.5 percent, while
Italy and Spain reported declines of 1 percent and 2.5 percent,
respectively. Energy production dropped 1.6 percent after a 0.3 percent
decline in October, according to today’s report. Output of
durable and non-durable consumer goods fell 1.1 percent and 1.2
percent, respectively, while production of capital goods rose
0.7 percent.
- Italy to Sell First New 15-Year Benchmark Bond in Two Years.
Italy will sell a new 15-year benchmark bond for the first time in more
than two years as the Treasury takes advantage of a plunge in borrowing
costs to extend the life of the country’s debt. The Rome-based Treasury
will place the new benchmark security via banks “in the near future and
in relation to market conditions,” according to an e-mailed statement
today. The Treasury hired Banca IMI SpA, Barclays Bank Plc, Credit
Agricole SA (ACA), Goldman Sachs Group Inc., JPMorgan Chase &
Co. for
the sale.
- European Stocks Decline for Third Day; TNT Express Drops. European stocks declined for a third
day as investors watched the U.S. financial-reporting season
amid concern that recent gains in share prices have overshot the
earnings potential. TNT Express NV (TNTE) plunged 41 percent after
United Parcel Service Inc. abandoned its bid to take over the company.
Electricite de France SA jumped the most in 13 months after France
agreed to compensate EDF for the deficits from its mandatory
public-service investments. The Stoxx Europe 600 Index fell 0.4 percent
to 286.01 at the close in London, for the longest stretch of losses in
four
weeks.
- French Strikes in Mali Continue as Islamists Vow Revenge. French forces battled Islamist
militants in Mali for a fourth day as a rebel spokesman said the intervention had opened the “gates of hell.” The insurgents are in retreat after French air strikes on
the eastern edge of the front line between government- and
rebel-controlled territory, France’s defense minister, Jean-Yves Le Drian, told reporters after a meeting of the inner “war
Cabinet.” The situation is “evolving favorably,” he said,
adding that the Islamist militants are “extremely well armed.”
- Lockhart Says Fed Balance Sheet Expansion Raises Concern.
Federal Reserve Bank of Atlanta President Dennis Lockhart said while
he’s supported the central bank’s open-ended bond purchases so far,
further expansion of a
record stimulus could complicate the eventual shrinking of the
balance sheet. “Open-ended does not mean without bound,” Lockhart said
in a speech in Atlanta. “I do think the growth of the Fed’s
balance sheet could have longer-term consequences that are
worrisome. While I’ve supported these policy decisions to date,
I acknowledge legitimate concerns.”
- Small Firms to Remain Missing Link in U.S. Expansion: Economy. Small companies will probably remain
a missing element of the current U.S. expansion as their role in
driving growth continues to wane, according to economists at Citigroup Inc. (C) Payrolls
at firms with fewer than 500 employees accounted for less than 50
percent of the total workforce for the first time in 2008 during the
recession and have barely recovered, according to their research. After hovering close to 50 percent,
small businesses’ share of gross domestic product began dropping
in 2001 to reach about 45 percent in the latest available data. In contrast to the gains in confidence for their larger
counterparts, sentiment among smaller companies remains at
recessionary levels.
- China Shuts Factories in Latest Bid to Ease Hazardous Pollution.
China shut dozens of factories and pulled government cars off the road
to limit pollution that hit hazardous levels for a third day, as state
media said Beijing was becoming more famous for its smog than its
culture or food. China Daily said yesterday the city was becoming better know for “Beijing Cough” afflicting its residents than
it was for Peking Duck or Peking Opera. With hospitals reporting more patients who complained of
heart and respiratory ailments, the government orders were part
of expanding efforts to tackle the pollution. The reaction
reflects a growing awareness within the Communist Party that
pollution is becoming a main instigator for social unrest,
environmentalist Dai Qing said in an interview.
- JPMorgan(JPM) Seen Facing U.S., U.K. Actions on Whale Trades. JPMorgan Chase &
Co. (JPM) is set to face new actions from U.S. and U.K. bank regulators
as early as today for botched trades that cost the company more than
$6.2 billion
last year, according to two people familiar with the matter.
Fox News:
- Obama demands debt ceiling hike, rejects negotiating cuts with GOP. President Obama used the final press conference of his first term to
again warn congressional Republicans that he will not negotiate with
them over the debt ceiling, saying that Washington must increase the
limit to pay its bills and such brinksmanship would be “absurd” and
“irresponsible.”
Business Insider:
NY Post:
- JCPenny(JCP) Stock Plunges After Bad Holiday. The flailing department store’s stock opened down about 8 percent
after a Wall Street analyst recommended investors sell their holdings —
although it recovered a bit in the afternoon to close down 4.7 percent,
at $18.26. Penney’s sales at stores open at least a year plummeted
more than 30 percent through most of the crucial holiday season,
sources close to the company told The Post this week.
Reuters:
- TNT slumps as UPS pulls bid on EU veto. UPS
(UPS) is dropping its $7-billion bid for Dutch delivery firm TNT
Express (TNTE.AS) after European anti-trust regulators said they would
veto it, leaving TNT's future in doubt and almost halving the value of
its shares. Shares in U.S.-based United Parcel Service Inc gained
1.2 percent on Monday after the world leader in the sector said in a
statement that European Union officials told it the EU executive
Commission would veto the deal. An EU source confirmed that and said the
decision could be made public as early as next week.
- Hedge funds nurse heavy losses after UPS-TNT deal collapses. United Parcel Service's decision
to abandon its 5.2 billion euro ($6.9 billion) bid for
TNT Express has left hedge funds nursing potential losses of more than $700 million, as the Dutch delivery firm's shares slid. So-called
merger arbitrage funds - which make money betting on the outcomes of
corporate events including takeovers - are estimated to have owned
around 30 percent of TNT shares before Monday's news European anti-trust
regulators would veto it, several sources familiar with the sector said.
- EURO GOVT-Spanish yields rise as dealers prepare for auctions.
Telegraph:
- Detroit motor show: Ford economist warns on America's finances. America
must return its public finances to long-term health or risk the
burgeoning recovery in the country's car industry, Ford's top
economist has
warned. The looming stand-off in Washington over lifting America's
$16.4trillion
(10.2trillion pound) debt ceiling was the chief shadow as the car
industry gathered for its first show of the year in Detroit on Monday. "Today
we don't have fiscal sustainability," said Ellen Hughes-Cromwick, chief
economist at Ford. Failure to fix America's long-term debt problem
"will generate a very weak period of economic growth."
Die Welt:
- EU Climate Rules Will Make Cars More Expensive. The planned limitation of cars' carbon dioxide emissions will increase the unit cost of building new vehicles by almost EU1,000, citing a study by ICCT.
Style Underperformer:
Sector Underperformers:
- 1) Coal -2.21% 2) Alt Energy -1.50% 3) Semis -.93%
Stocks Falling on Unusual Volume:
- AAPL, NTE, SPWR, KEG, QIHU, FRAN, KBR, VRA, FBC, LMNX, CRUS, SNFCA, S, LEAP, BFR, COF, TAHO, HRZN, BDC, SYT, LMNX, MXIM, TNC, MHO, SMG, MX, CHUY, FB, FIVE, AMAG, ROCK and CEC
Stocks With Unusual Put Option Activity:
- 1) XLY 2) LRCX 3) PHM 4) XHB 5) CRUS
Stocks With Most Negative News Mentions:
- 1) KBR 2) S 3) JPM 4) WFC 5) LCC
Charts:
