Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 87.75 unch.
- NASDAQ 100 futures -.16%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:55 am EST
- Univ. of Mich. Consumer Confidence for January is estimated to rise to 75.0 versus 72.9 in December.
Upcoming Splits
Other Potential Market Movers
- The UK retail sales report and the (DPZ) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and industrial shares in the region. I expect US stocks to open mixed 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: Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 159.0 +80.68%
- Total Put/Call .78 -10.34%
Credit Investor Angst:
- North American Investment Grade CDS Index 87.20 -1.72%
- European Financial Sector CDS Index 132.55 -.22%
- Western Europe Sovereign Debt CDS Index 99.64 -.19%
- Emerging Market CDS Index 211.58 -1.28%
- 2-Year Swap Spread 14.75 +2.25 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -16.0 +1.75 bps
Economic Gauges:
- 3-Month T-Bill Yield .08% unch.
- China Import Iron Ore Spot $145.40/Metric Tonne unch.
- Citi US Economic Surprise Index 5.20 +1.9 points
- 10-Year TIPS Spread 2.53 +3 bps
Overseas Futures:
- Nikkei Futures: Indicating +310 open in Japan
- DAX Futures: Indicating -1 open in Germany
Portfolio:
- Higher: On gains in my tech/retail/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Euro Area Seen Stalling as Draghi’s Pessimism Shared: Economy. The
euro-area economy won’t return to growth until the next quarter as a
recovery in Italy is delayed and France continues to shrink, according
to a survey of economists. Gross domestic product in the 17-nation
currency region will stay unchanged in the three months through March,
before rising 0.1 percent and 0.2 percent in the
second and third quarters, the median forecast in a Bloomberg News
monthly survey showed. GDP probably fell 0.4 percent last year and will
decline 0.1 percent in 2013, economists said.
- Japan Seeks Deeper U.S. Ties as Obama Envoy Warns on Island Spat. Japan’s new foreign minister visits
the U.S. today in a bid to strengthen ties with the Obama
administration, which is concerned that its Asian ally’s
territorial dispute with China will disrupt regional stability.
Fumio Kishida meets with Secretary of State Hillary Clinton today in
Washington, in the highest-level meeting between the two countries since
Prime Minister Shinzo Abe took office last month. Abe is boosting
defense spending in response to China’s increasingly assertive claims to
islands in the East China Sea. The conflict has damaged a $340 billion
trade relationship
and prolonged Japan’s recession, while stoking U.S. concerns of
an escalating confrontation.
- China’s Stocks Fall for Second Day, Led by Industrial Companies.
China’s stocks fell for a second day, led by financial and industrial
companies, after valuations reached the highest level since May. Gross
domestic product and industrial output data are due to be released
tomorrow. The Shanghai Composite Index (SHCOMP) dropped 1.1 percent to
2,284.91 at the close, while the CSI 300 Index (SHSZ300) lost 0.9 percent to 2,552.76. The Shanghai index slid 0.7 percent yesterday on
concerns shares are overbought.
- Americans’ Economic Outlook Fell in January to Three-Month Low. Americans’ economic outlook deteriorated in January to a three-month low as paychecks began reflecting higher taxes. The gap between positive and negative expectations widened
to minus 7 this month from zero in December as the share saying
the U.S. economy is improving dropped to the lowest since
September, according to the Bloomberg Consumer Comfort Index.
The weekly measure declined to minus 35.5, the weakest since
Oct. 7, from minus 34.4 in the prior period.
- Rio(RIO) CEO Albanese Steps Down as $14 Billion Writedown Looms. Rio
Tinto Group (RIO), the second-biggest mining company, will take about
$14 billion of writedowns for failed deals in aluminum and coal led by
Chief Executive
Officer Tom Albanese, who departs after almost six years in charge.
Wall Street Journal:
- Algeria Hostages' Fate Uncertain. The Algerian army attempted to take control of the gas field where
suspected Islamic militants are holding foreign hostages, the site's
operator BP PLC said Thursday, amid unconfirmed news reports that there had been casualties in the operation. British
Prime Minister David Cameron only found out about the military
operation after it was under way, a spokesman for Mr. Cameron said
Thursday afternoon.
- GOP Weighs Short-Term Debt-Limit Increase.
House Budget Chairman Paul Ryan (R., Wis.) on Thursday said
Republicans are discussing whether to support a short-term increase in
the nation's borrowing authority,
possibly linking the debt ceiling to future talks aimed at reaching a
major deficit deal. Mr. Ryan, speaking to reporters at a Republican retreat at the
Kingsmill Resort in Williamsburg, said lawmaker are reviewing options
for dealing with the trio of fiscal deadlines in the next three months:
the debt ceiling, automatic across-the-board spending cuts and the
expiration of a temporary measure funding government operations.
- WSJ/NBC Poll Shows Continuing Support for NRA. According to the poll, the NRA enjoys 41% positive approval rating, with
a 34% negative rating. That compares with 41% positive and 29% negative
in January 2011.
Fox News:
- Does White House plan enlist doctors in gun control fight? A few lines in President Obama's sprawling gun control plan are
stirring accusations from conservatives that the administration is
trying to enlist doctors in a national campaign against owning
firearms. The easy-to-miss language was part of Obama's package of executive
actions and legislative proposals that includes a new assault-weapons
ban and universal background checks. The provision on doctors, though,
has begun to generate just as much controversy. "The idea that your doctor would ask you if you have firearms in your
house as part of an examination of your health is repugnant," National
Rifle Association President David Keene told Fox News on Thursday,
accusing the administration of trying to "demonize firearms" by implying
that owning them is a "health problem."
Reuters:
- Oil higher on Algerian incident, supportive U.S. data. Oil prices rose on Thursday as the attack on an
Algerian gas facility reinforced concerns about geopolitical risk to supply in the region, while upbeat U.S. economic data also supported petroleum futures. Brent March crude rose 80 cents to $110.48 a barrel
by 11:50 a.m. EST (1650 GMT), having traded from $109.45 to
$110.89.
- Housing starts climb to highest rate since June 2008. Groundbreaking to
build new homes accelerated in December to its fastest pace in over four years.
- Fed Concerned About Overheated Markets on Bonds. Federal Reserve officials are voicing increased concern that
record-low interest rates are overheating markets for assets from
farmland to junk bonds, which could heighten risks when they reverse
their unprecedented bond purchases. Investors have been snapping
up riskier assets since the Fed boosted its bond buying to reduce
long-term borrowing costs after cutting its overnight rate target close
to zero in December 2008. Enthusiasm for speculative-grade bonds is at
unprecedented levels, driving a Credit Suisse index that tracks the
yield on more than 1,500 issues to a record-low 5.9 percent last week.
Telegraph:
Expansion:
- Spain to raise sales tax on healthcare products to 21% from 10% following a ruling from the EU court.
Xinhua:
- NDRC Official Says 'Can't Relax' on Inflation Risks. Keeping
consumer prices basically stable is an important target for macro
controls, citing a National Development and Reform Commission official.
Style Underperformer:
Sector Underperformers:
- 1) Banks -.30% 2) Airlines -.25% 3) Gold & Silver -.20%
Stocks Falling on Unusual Volume:
- COT, LEAP, SYZM, HK, COLM, NTI, WSM, THRX, NTCT, ROLL, AMBA, HLF, NGG, CVI, VFC, C, EOPN, USNA, CYBX, UNXL, BAC and FET
Stocks With Unusual Put Option Activity:
- 1) CBS 2) HYG 3) AMAT 4) FAST 5) TRIP
Stocks With Most Negative News Mentions:
- 1) COLM 2) YUM 3) C 4) BA 5) FAST
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +1.53% 2) Hospitals +1.49% 3) Semis +1.07%
Stocks Rising on Unusual Volume:
- CBS, ASML, INFN, KLAC, FITB, NUS, CYMI, PRIM and HAIN
Stocks With Unusual Call Option Activity:
- 1) WMB 2) KLAC 3) EBAY 4) CAG 5) TIVO
Stocks With Most Positive News Mentions:
- 1) JNPR 2) CCL 3) A 4) FITB 5) CI
Charts:
Evening Headlines
Bloomberg:
- Al-Qaeda Group Holding Western Hostages Demands France Quit Mali.
An al-Qaeda-linked group in Algeria took American, Norwegian and British
workers hostage in a pre- dawn attack the group said is intended to
force France to end its offensive against Islamist insurgents in
neighboring Mali. The attackers on an Algeria natural gas complex,
which is partly operated by BP Plc, held more than 20 foreigners hostage
after releasing Algerian citizens, according to the Algerian Press
Service. The militant group, calling itself the “Signatories by Blood,”
is demanding that France end its military attacks in Mali, according to
Mauritania’s private ANI news agency. The French action is aimed at
al-Qaeda affiliates and Tuareg
separatists that have taken control of the northern half of the nation
and were advancing toward the capital.
- French Ground Forces to Attack Mali Rebel Territory. French
ground forces advanced toward northern Mali to engage Islamist
militants as West African soldiers prepared to join the fight against
the insurgents. French soldiers moved from the capital, Bamako, for the
start of what they expect will be “a guerrilla-like conflict,” Admiral Edouard Guillaud, France’s chief of defense staff, said yesterday on Europe 1 radio from Paris.
- Italy’s Bersani Pushes for Payroll Tax Cut Financed by Wealthy. Pier Luigi Bersani, the front-runner
in next month’s Italian election, is pushing for a payroll-tax
cut and would finance it by raising taxes on the rich and
cracking down on fiscal evasion. “There is room to finance a reduction of these burdens,”
Bersani said late yesterday in an interview televised on Canale
5’s “Italy Asks” program. “A redistribution within the fiscal
system is possible; something progressive can be done.”
- Cameron Seen Highlighting Work, Finance in Looser EU Ties.
Prime Minister David Cameron, seeking to give his vision of a looser
U.K. relationship with the European Union in a speech tomorrow, may
place bringing home
decision-making on finance, the courts and labor at the heart of
his pitch.
- Chinese Dump Equities as Foreigners Rush in:
Chart of the Day. Chinese regulators are accelerating approvals for
overseas firms to buy the country's securities at a record pace as local
investors abandon equities. The State Administration of Foreign
Exchange awarded $15.8 billion of quotas for qualified foreign
institutional investors to trade stocks and bonds in 2012, according to
regulatory data compiled by Bloomberg. That's more than the previous
five years combined. Stock accounts containing funds fell by 1.75
million to 55.2 million last year, the first annual loss since at least
2008.
- Default Alarm Rings as Trust Loans Jump Sevenfold: China Credit. A seven-fold jump in last month’s
lending by China’s trust companies is setting off alarm bells
for regulators to guard against the risk of default. So-called trust loans rose 679 percent to 264 billion yuan ($42 billion) from a year earlier, central bank data showed on Jan. 15. That accounted for 16 percent of aggregate financing, which includes bond and stock sales. The amount of loans in China due to mature within 12 months doubled in four years to 24.8 trillion yuan, equivalent to more than half of gross
domestic product in 2011, and the People’s Bank of China has set
itself a new goal of limiting risks in the financial system.
- Abe Stimulus Risks Fizzling as Citigroup(C) Sees Japan Job Gap.
Japan’s 10.3 trillion yen ($117
billion) fiscal stimulus may add less than a quarter of the
jobs the government predicts, casting doubt on Prime Minister
Shinzo Abe engineering a sustained recovery. Even with more central bank
easing, most of the impact of Abe’s spending won’t spread far beyond
public works projects, Citigroup Inc. (C) says. It estimates that
100,000 jobs will be created, compared with the government’s figure of
600,000. BNP Paribas SA (BNP) says 150,000.
- Singapore Exports Drop Most in 14 Months as Recovery Delayed.
Singapore’s exports declined the most in 14 months in December as
manufacturers shipped fewer electronics and pharmaceuticals, hurting
economic recovery. Non-oil domestic exports slid 16.3 percent from a
year earlier, after a revised 2.6 percent drop in November, the trade
promotion agency said in a statement today. The median of 18 estimates
in a Bloomberg News survey was for a 7.6 percent decline. The drop
was the most since October 2011, based on previously reported data.
Exports rose 0.5 percent in 2012, the worst performance in three years,
according to Bloomberg calculations. “The ugly export reading raises the
specter of recession once again,” Chua said. “There is a high
likelihood that industrial production also contracted sharply in
December. These are signs that Singapore’s manufacturing is facing
hollowing out pressures, especially given the better trade data seen in
Northeast Asia and Malaysia.” Singapore’s electronics shipments by companies such as Venture Corp. fell 19.1 percent in December from a
year earlier, after slipping 16.5 percent the previous month.
- Boeing(BA) 787 Fleet Grounded by U.S. in First Since 1979. U.S.
regulators’ decision to temporarily ground Boeing Co.’s 787 Dreamliner,
their first move involving an entire model in 34 years, came five days
after Transportation Secretary Ray LaHood proclaimed it safe. The
Federal Aviation Administration, which certified the plane in 2011,
ordered flights on the 787 halted until airlines can show the
plane’s lithium-ion batteries “are safe and in compliance,” according to
an agency statement yesterday. It didn’t say how they should accomplish
that.
- Brazil to Hold Key Rate as Inflation Quickens Amid Slow Growth.
Brazil’s central bank signaled it will keep borrowing costs at a record
low this year as it tries to manage faster inflation amid a slower than
expected recovery. While inflation is slowing in Mexico and Chile, price
pressures are building in Brazil as the government pumps demand by
reducing taxes and expanding credit amid record low unemployment. At the
same time, a contraction in investment and industrial output is
complicating President Dilma Rousseff’s efforts to revive the slowest
growth in three years.
- Business Groups Propose Raising Age for Entitlement Benefits. The
Business Roundtable, which represents chief executives of major U.S.
companies, proposed shoring up Social Security and Medicare by raising
the eligibility age without increasing taxes on income subject to the
Social Security payroll tax.
Wall Street Journal:
- Militants Grab U.S. Hostages. About 40 Foreigners Taken in Algeria; Islamists Claim Responsibility, Blame French. Militants with possible links to al Qaeda seized about 40 foreign
hostages, including several Americans, at a natural-gas field in
Algeria, posing a new level of threat to nations trying to blunt the
growing influence of Islamist extremists in Africa.
- A Health Scare for Small Businesses. Ahead of Health-Care Law, Small Firms Worry About Crossing the Crucial 50-Person Threshold. During her two-plus years in business, Elizabeth Turley has steadily
recruited new employees for her apparel company, Meesh & Mia Corp.,
to keep pace with its rapid growth. But this year could be different.
Instead of increasing her staff, she plans to hire independent
contractors for tasks that can be outsourced, such as marketing and
product development. Her reason? Meesh & Mia is on the cusp of having 50 full-time
employees. If the company hits that threshold, it will have to provide
health coverage that meets government standards or potentially pay a
penalty.
Fox News:
- Treasury Picks Citgroup(C), J.P. Morgan(JPM) to Sell Its GM(GM) Shares.
Treasury will pay the banks one penny per share sold, according to the
agreement posted on the site. Treasury said in December that the
government's remaining stake in GM would be sold over the next year to
15 months. Selling
the shares will close out the government's stake in the company, which
was a result of the financial crisis bailout, known as the Troubled
Asset Relief Program. Taxpayers invested about $50 billion in GM under TARP. The government
sold part of its GM stake in a late-2010 initial public offering. The
Treasury had been reluctant to sell the remaining shares because it
would book a loss on the initial investment. One watchdog estimated that
the Treasury would need to sell GM at about $52.39 a share to break
even. GM shares closed down 4.2% at $29.31 Wednesday.
- Obama, Biden gun control proposals assailed as 'light' on Hollywood, gaming industry. In the days following last month’s
massacre at Sandy Hook Elementary School in Newtown, Conn., President
Obama promised to convene a broad national dialogue about the causes of
gun violence. But in the proposals that the president put forward on
Wednesday, selected from a range of options prepared for him by Vice
President Biden, critics noticed what they considered to be a large
hole.
“It looks like the entertainment industry, once again, is getting off
light,” said Dan Isett, director of public policy at the Parents
Television Council, a non-profit organization formed 16 years ago to
help parents shield children from the violence, sex and profanity
offered in TV shows, movies, video games and online fare.
MarketWatch.com:
- Columbia Sportswear(COLM) lowers outlook; shares tumble.
Columbia Sportswear Co. lowered its fourth-quarter expectations as the
maker of active outdoor apparel's net sales were hurt by mild winter
weather in North America
during most of the holiday shopping season, lower customer traffic in
key markets and a more promotional environment. Shares fell 7.1% to $48.45 in recent after-hours trading.
CNBC:
- Fed Hawk Voices Doubts Over Benefits of Bond Buying. A senior Federal Reserve official voiced skepticism on Wednesday
about the benefits of additional asset purchases by the U.S. central
bank, while a more dovish policymaker maintained his campaign for
additional policy easing. Dallas Federal Reserve President
Richard Fisher, in remarks that were mainly about the need to reorganize
banks that were "too big to fail," said the effectiveness of the Fed's
massive bond purchases in helping the economy was fading.
- Why Brazil's Once-Booming Economy Is Losing Its Shine. "The last decade was very good for Brazil," James Lockhart Smith, head of Latin America, Maplecroft, told CNBC. "Now,
Brazil is having to compete with a lot of other countries and it has an
Achilles heel in the cost of doing business, so it's much more
complicated to generate growth."
Zero Hedge:
Business Insider:
LA Times:
CNN:
-
Gun industry thrives in face of ban proposal. Gun stocks rose Wednesday, even as President Obama called on Congress to pass an assault weapon ban. The stock prices for Smith & Wesson Holding Co. (SWHC) and Sturm, Ruger & Co. (RGR) rose about 4%.
Reuters:
- Google(GOOG) snaps up junk bonds in desperate grab for yield. Corporate
treasurers at companies like Google (GOOG) are being forced by the
Federal Reserve's low-rate policy to invest in ever-riskier credit
products, including longer-dated investment-grade bonds, junk bonds and
leveraged loans, according to buyside and sell-side sources. In an
effort to get a return on their mountains of cash at hand, Google and
others have purchased high-yield bonds and leveraged loans, while names
like Microsoft and Apple (AAPL) are said to have dabbled in
non-investment-grade securities. "Many
of the companies with the largest levels of cash on hand have bought
high-yield bonds and one of the big areas of interest this year is
leveraged loans," said a fund manager at one of the biggest US
investment firms. "Some are also looking at emerging market local
debt as a category," he said, although far fewer than those going down
the credit spectrum and into non-investment-grade loans and bonds.
- Nearly $1 trillion of debt at risk of downgrade to junk in 2012-S&P. The
amount of sovereign and
corporate credit on the cusp of being downgraded to junk status more
than quadrupled in 2012, due primarily to an erosion in the credit
quality of the world's banking sector, Standard & Poor's data showed
on Wednesday. At the end of last year, S&P rated $984.8
billion worth of debt, from 52 separate issuers, one step away from
speculative grade, also referred to as junk. At the end of 2011, the number of credits that were one downgrade away from junk status was 38, representing $227.4 billion.
"Most of the downward pressure that affected potential 'fallen angels'
was because of the European credit crisis," Diane Vazza, credit analyst
at S&P, told Reuters, referring to
issuers whose ratings are close to being cut to junk.
- EBay(EBAY) holiday quarter sales jump; 2013 forecast cautious. EBay Inc reported
holiday quarter results that just beat Wall Street expectations, but
the e-commerce company also gave a cautious forecast for 2013. EBay shares climbed 1.7 percent to $53.80 in after-hours trading following the announcement.
- Fed's Kocherlakota: lowering interest rates is not a panacea. Lowering interest rates helps boost the economy and bring down unemployment, a top Federal Reserve official said on Wednesday, echoing exactly the
phrasing of Fed Chairman Ben Bernanke on the effectiveness of
monetary policy, but advocating a different way of getting
there.
Telegraph:
Les Echos:
- French Business Failures Rise 12.5% in Fourth Quarter. More than 16,000 failures registered, a rate not seen since the worst moments of the fiscal crisis, citing a report by business information group Altares. Failures are 12.5% higher than the year-earlier quarter.
China Daily:
- U.S.
Quantitative Easing May Lead to Global Price Rises. Several rounds of
quantitative easing by the U.S. may lead to rises in global commodites and capital prices, Chinese Academy of Social Sciences researcher Gao Haihong wrote in a commentary.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 110.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 87.75 +1.75 basis points.
- NASDAQ 100 futures -.24%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Housing Starts for December are estimated to rise to 890K versus 861K in November.
- Building Permits for December are estimated to rise to 905K versus 899K in November.
- Initial Jobless Claims are estimated to fall to 368K versus 371K the prior week.
- Continuing Claims are estimated to rise to 3150K versus 3109K prior.
10:00 am EST
- Philly Fed for January is estimated to fall to 6.0 versus a reading of 8.1 in December.
Upcoming Splits
Other Potential Market Movers
- The Fed's Lockhart speaking, ECB monthly report, China GDP report, (GPN) investor day, weekly
Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory
report and the Bloomberg Economic Expectations Index for January could
also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
