Style Underperformer:
Sector Underperformers:
- 1) Coal -2.1% 2) Biotech -1.55% 3) Steel -1.40%
Stocks Falling on Unusual Volume:
- NXST, BBEP, SNI, E, CS, APU, PRU, HK, AKAM, IRBT, IRG, BG, ABCO, KEYW, CPA, THR, GIL, MCO, ANN, SNI, SWM, ODFL, MNTX, TDC, SNY, YELP, GMCR, MHP, NWSA, EFX, TVL, OPEN, PMT, USG, CYS, DRIV, OZM and EFX
Stocks With Unusual Put Option Activity:
- 1) SCHW 2) LO 3) LTD 4) GPS 5) MGM
Stocks With Most Negative News Mentions:
- 1) CATO 2) GRA 3) MWW 4) SYMC 5) CBL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +.59% 2) Defense -.01% 3) Foods -.30%
Stocks Rising on Unusual Volume:
- DV, ESI, NTES, TRLG, AAP, PTEN, CBG, CNW, HOS, DV, ORLY, VSAT, TW, MPWR, BAS and XXIA
Stocks With Unusual Call Option Activity:
- 1) DVAX 2) GPS 3) STSI 4) AKAM 5) NWS
Stocks With Most Positive News Mentions:
- 1) CCE 2) TGT 3) GPS 4) ROST 5) FRED
Charts:
Evening Headlines
Bloomberg:
- Draghi Counts Cost of Euro’s Salvation as Currency Rebound Bites. Mario
Draghi is discovering that confidence in the euro area comes at a cost.
Since the European Central Bank president talked up the economic
outlook last month and signaled that the worst of the debt crisis is
over, the euro has surged to a 14-month high against the dollar.
Banks have fueled the euro’s rally by paying back more emergency loans
than forecast, shrinking the ECB’s balance sheet just as the Federal
Reserve and the Bank of Japan expand theirs. That’s threatening to
stymie Europe’s recovery before it has begun, highlighting the tightrope
Draghi is walking as he seeks to boost confidence without encouraging
euphoria. With looser monetary policy in the U.S. and Japan weakening
the dollar and the yen, the ECB may soon come under pressure to enter
the so-called “currency war” and rein in the euro, economists said.
“The euro-zone economy needs a rising euro like it needs a hole in the
head,” said Nick Kounis, head of macro research at ABN Amro in
Amsterdam. “If verbal intervention does not stem
the euro’s upward trend, the central bank may eventually once
again consider rate cuts.”
- Libor Accords Leave Banks Facing ‘Massive’ State Claims. A
multistate probe of alleged manipulation of interest rates threatens to
leave banks liable for billions of dollars in estimated state and local
losses from the scandal, even as they settle with national regulators.
New York Attorney General Eric Schneiderman is helping lead a probe
into claims that banks rigged global benchmarks for borrowing, adding to
investigations by other authorities, including the U.S. Justice
Department. Royal Bank of Scotland Group Plc agreed yesterday to pay
about $612 million to U.S. and U.K. regulators to resolve their claims. “The damage to public entities is a matter of great concern to state and local governments,” Schneiderman said in
an interview. “These were allegations of really despicable
conduct.” More than 12 states are participating in the probe,
according to a person familiar with the matter who requested
anonymity because he isn’t authorized to speak publicly.
- Monte Paschi Hidden Deals Will Have EU730 Million Impact. Banca
Monte dei Paschi di Siena SpA, engulfed by criminal probes into the
conduct of its former management, said 2012 net assets will take a 730
million-euro ($987 million) hit after accounting for structured deals
that hid earlier losses. Monte Paschi, the subject of investigations spanning from
allegations of market manipulation to false bookkeeping, said
the gross impact on net assets of the trade dubbed Santorini
will be 305.2 million euros, while Alexandria will lead to a
restatement of 272.5 million euros, according to a stock-
exchange statement.
- ECB Dashes Irish Hopes of Quick Decision on Banking Debt Plan. European Central Bank policy makers
sought more time to weigh a proposal presented by Ireland
today to restructure the cost of bailing out former Anglo Irish
Bank Corp., prolonging a saga that began four years ago with the
near-collapse of the lender. A decision is unlikely within the next 24 hours as some
members of the ECB’s governing council want to discuss the
blueprint with their own central banks first, according to a
person familiar with the situation, who asked not to be
identified, as the matter is private.
- Hollande Draws French Industry Ire as Nuclear-Energy Edge Fades. French industrial groups are up in
arms as their once-celebrated nuclear-energy edge evaporates. After decades when their factories churned out everything
from steel, glass and chemicals with one of the cheapest power
prices in Europe thanks to the country’s 58 nuclear reactors,
French companies’ competitive advantage is being whittled away
as the U.S. embrace of shale gas cuts energy prices there and as
Germany gives businesses fiscal breaks against higher
electricity costs.
- Top
Forecaster Westpac Leads Yen Bulls in BOJ Doubts. Westpac Banking Corp.,
the most accurate foreign-exchange forecaster in the fourth quarter is
betting against the consensus trade that made the yen the biggest loser
versus the dollar in the past six months. Westpac, HSBC Holdings Plc and
Royal Bank of Canada are the most bullish of 61 firms surveyed by
Bloomberg, forecasting 80 yen against the dollar by the end of the year,
from 93.64 yesterday.
- PBOC Signals Inflation Concern as Economy Rebounds. China’s
central bank signaled concern
that inflation risks will increase and said that monetary easing
by nations, including the U.S. and Japan, may push up commodity
prices and make global capital flows more volatile. China must be alert
to changes in price-gain expectations and to imported inflation, the People’s Bank of China said yesterday in its fourth-quarter monetary policy report. The costs of labor-intensive products, services and agricultural goods may rise persistently on slowing labor-supply growth, the
PBOC said. “An economic recovery and demand expansion may pass into
CPI in a relatively fast manner,” the central bank said.
- China Stocks Drop; Developers Fall.
China Vanke Co. and Poly Real Estate Group Co., the two biggest
developers, slid at least 1 percent after the China Securities Journal
said some cities may slow approvals of new home sales. China Minsheng
Banking Corp. slumped 5.6 percent after surging 77 percent since Dec. 3
with valuations reaching the highest level since December 2010. Tsingtao
Brewery Co. led gains for consumer-staples producers. The Shanghai Composite Index fell 0.8 percent to 2,414.30 as of 11:01 a.m. local time, the steepest loss since Jan. 17.
- Japan Radar Targeting Protest Is War Signal, Global Times Says. Japan is exploiting an incident in
which a Chinese ship used weapons-targeting radar on a Japanese
naval vessel and helicopter to prepare the people of both
countries for war, China’s state-run Global Times said. “We believe in doing this Japan is at the same time also
sounding a combat alarm among the Chinese and Japanese public,”
the Chinese-language editorial said today. Ordinary people who
don’t understand naval affairs will believe the two countries
are very close to war, it said.
- IMF Says India Should Hold Rates Until Inflation Curbed. India’s central bank should refrain
from cutting interest rates until inflation is contained even as
the nation faces a subdued economic recovery, according to the
International Monetary Fund.
“With policy space strictly circumscribed because of high
fiscal deficit and elevated inflation, the economy is in a
weaker position than before the global financial crisis,” the
IMF said in a statement released yesterday. “It is advisable to
maintain the current level of policy rates until inflation is
clearly on a downward trend.”
- Goldman Sachs’s(GS) Dreyfus, Margiotta Said to Leave Hedge-Fund Unit. Daniel
A. Dreyfus and Paul W. Margiotta are leaving the Goldman Sachs
Investment Partners hedge-fund unit that was established to allow
clients to invest
with some of the firm’s top proprietary traders. Dreyfus, 37, a managing director who ran investments in
natural resources, left last month, according to a person
familiar with the matter who declined to be identified because
the information isn’t public. Margiotta, 41, a vice president
who specialized in credit, will leave the New York-based company
later this month, the person said.
Wall Street Journal:
- Obama Relents on Secret Drone Memo. On
the eve of a battle to confirm his pick for America's CIA chief,
President Barack Obama agreed Wednesday to let a small group of
lawmakers look at a long-sought, classified Justice Department opinion
explaining his administration's legal justification for targeting
killings of American terror suspects in other countries. The secret
legal memo has became a flash point in the nomination of White House
counterterrorism chief John Brennan to become director of
the Central Intelligence Agency. Lawmakers this week wrote to Mr. Obama
demanding the release of Justice Department documents that they first
began seeking soon after a U.S. missile struck the vehicle carrying the
radical, American-born cleric Anwar al-Awlaki in September 2011, killing
him.
- Wave of Large Buyouts Unlikely to Follow Dell. The $24.4 billion deal to take Dell Inc. DELL +0.75% private shows what is possible in the leveraged-buyout market but
doesn't necessarily portend a return of the megadeals popular before the
financial crisis. By far the largest private-equity transaction
since financial markets crashed in 2008, the Dell deal has components
that are unusual and will make its size difficult to replicate, bankers,
private-equity executives and analysts said.
- Vote on Gay Ban Threatened to Split Scouts. The Boy Scouts of America on Wednesday delayed until May a decision on
whether to end the group's ban on gay members, after a planned vote
exposed rifts that threatened to break apart the nearly 103-year-old
group.
- U.S. Coal Finds Warm Embrace Overseas.
For all the troubles of the U.S. coal industry at home, its business
with the rest of the world is brisk. Last year, the U.S. set a record
for coal exports, with the final tally estimated to top 120 million
tons, double what it exported as recently as 2009.
- GE(GE) Bring Engine Work Back. As Boeing Co. pays a price for having farmed out crucial parts on its
new Dreamliner, General Electric Co.'s aviation division is busy
bringing work on its engines back in-house.
- Sex Attacks Fuel Outrage in Egypt. Rash
of Assaults Prompts Advocacy Groups to Publicize Grisly Accounts in an
Often Indifferent Society. Public testimonies from several women who
allege to have been the
victims of sexual assault during recent antigovernment demonstrations in
Cairo have suddenly brought a long-festering issue to the fore of
Egypt's conservative society. On Wednesday, the issue drew fresh attention as hundreds of Egyptian
activists marched in Cairo to demand an end to sexual violence against
women and Amnesty International issued a report urging President
Mohammed Morsi to take action against what the group says is a rampant
and growing problem. Gang rapes and mob attacks against women—particularly in crowded
public spaces—aren't new to Egypt. But several advocacy groups are for
the first time urging women to reveal their allegations to an often
skeptical and indifferent public.
- The Unscary Sequester. Washington is in a fit of collective terror over the "sequester," aka the impending across-the-board spending cuts. Trying
to explain the zero economic growth at the end of 2012, White House
spokesman Jay Carney blamed Republicans for "talk about letting the
sequester kick in as
though that were an acceptable thing." He left out that President Obama
proposed the sequester in 2011.
MarketWatch.com:
CNBC:
- Bond Frenzy Stokes Bubble Fears in China's Real Estate. Chinese property companies are rushing to the dollar bond market, almost
matching last year's sales in the first month of 2013 alone, in a
frenzy that could inflate the sector's gearing and the broader risk of a
housing price bubble.
Zero Hedge:
- Euphoria. (graph) Presented with little comment aside from noting that the only time
stocks have been this 'euphoric' was right before the collapse in 2000
and right before the collapse in 2008.
Business Insider:
Reuters:
- Green Mountain(GMCR) shares fall on weak sales outlook. Green Mountain Coffee Roasters Inc forecast current-quarter sales below Wall Street expectations and said growth would slow in its coffee and espresso maker business, sending its shares down 10 percent in after-market trade.
- Iran's Ahmadinejad seeks strategic axis with Egypt. President
Mahmoud Ahmadinejad, on the first visit to Cairo by an Iranian leader
in more than three decades, called for a strategic alliance with Egypt
and said he had offered the cash-strapped Arab state a loan. In a step by Iran to advance ties that were broken in 1979,
the Iranian foreign minister said Egyptian tourists and
merchants would no longer require visas to visit, Egypt's state
news agency reported.
Financial Times:
- Commodity hedge fund investors seek exit. Some pension funds, therefore, have begun to lose enthusiasm for the hedge fund sector, fund managers report. “There’s some frustration,” one says. A veteran commodity hedge fund
manager adds: “The industry is not what it once was. It’s a contracting
industry. Every dollar is hard won.” The disillusionment with the commodity hedge funds, which typically
charge fees of 2 per cent plus 20 per cent of profits, has made itself
felt in the past six months. Pension funds, insurers, and other hedge
fund investors have pulled a large chunk of their money out of the
sector.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 115.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 88.75 -1.75 basis points.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Preliminary 4Q Non-farm Productivity is estimated to fall -1.4% versus a +2.9% gain in 3Q.
- Preliminary 4Q Unit Labor Costs are estimated to rise +3.0% versus a -1.9% decline in 3Q.
- Initial Jobless Claims are estimated to fall to 360K versus 368K the prior week.
- Continuing Claims are estimated at 3197K versus 3197K prior.
3:00 pm EST
- Consumer Credit for December is estimated to fall to $14.0B versus $16.045K in November.
Upcoming Splits
Other Potential Market Movers
- The Fed's Stein speaking, Fed's Evans speaking, ECB's Draghi speaking, EU Finance Leaders Summit, Eurozone Industrial Production data, Spain/France 10Y bond auction, BoE rate decision, ECB rate decision, Japan trade data, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory data could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology 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.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 116.0unch.
- Total Put/Call .98 +5.38%
Credit Investor Angst:
- North American Investment Grade CDS Index 89.46 +1.09%
- European Financial Sector CDS Index 157.75 +1.89%
- Western Europe Sovereign Debt CDS Index 106.78 +.28%
- Emerging Market CDS Index 232.93 -.19%
- 2-Year Swap Spread 16.0 -.75 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -16.75 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- China Import Iron Ore Spot $155.10/Metric Tonne+.58%
- Citi US Economic Surprise Index -29.8 +.1 point
- 10-Year TIPS Spread 2.55 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating -30 open in Japan
- DAX Futures: Indicating -2 open in Germany
Portfolio:
- Higher: On gains in my tech/medical sector longs and emerging markets shorts
- Disclosed Trades: None
- Market Exposure: 50% Net Long
Bloomberg:
- Berlusconi Closes Bersani Gap to Error Margin, Poll Shows. Former
Italian Prime Minister Silvio Berlusconi narrowed the lead of
front-runner Pier Luigi Bersani to within the margin of error of an
opinion poll for the first time before Feb. 24-25 elections. The gap
between the two narrowed 0.3 percentage points from yesterday to 3.7
points, according to a daily tracking poll by Tecne institute for
SkyTG24. The survey has a margin error of 4 percentage points. Tecne had
Bersani leading by 14 percentage points on Jan. 2.
- European Stocks Drop on Concern Over Italian Austerity. UniCredit SpA and Intesa Sanpaolo SpA led a drop in Italian
shares. Vinci SA, Europe’s biggest builder, slid 3.3 percent
after posting a decline in 2012 profitability. ArcelorMittal
climbed 1.1 percent. Volvo AB jumped 4.2 percent even after
fourth-quarter profit fell as the company predicted its North
American and European markets will improve this year.
- Boehner Opposes Delay in Spending Cuts Without ‘Reforms’. House Speaker John Boehner said he will oppose any delay of
$1.2 trillion in automatic U.S. spending reductions set to begin March 1
unless Congress replaces them with other “cuts and reforms.” Boehner
said it’s time for Senate Democrats and President Barack Obama to come
up with a plan to replace the spending cuts. He said he is “more than
willing” to work with them as he reiterated his opposition to
tax-revenue increases in such a proposal. “At some point,
Washington has to deal with its spending problem,” Boehner, an Ohio
Republican, told reporters at a Washington news conference today. “I’ve
watched them kick this can down the road for 22 years that I’ve been
here. I’ve had enough of it. It’s time to act.”
- Gun-Plagued Chicago: Won’t You Come Home, President Obama? As gun violence plagues Chicago, an editorial and a news story in
President Barack Obama’s hometown newspapers this week have called on
him to come home to help address the city’s shootings and murder
problem. An editorial in today’s Chicago Sun-Times suggests Obama
hasn’t paid enough attention to the violence in his home city. “Two days
after the mass murder at a school in Newton, Conn., President Barack
Obama flew there to console the families and call for stricter gun
control,” the editorial says. “How many more children must die in
Chicago before the president does the same here?” In yesterday’s
Chicago Tribune, a news story reported on a growing chorus in the
community for the president to come to Chicago to speak about the
violence in his city. “What began as gentle pleas for a little attention
from the White House has turned into demands that the president hop on
Air Force One,”
the story said. “In African-American communities where gun violence is
rampant, people want something extra from the first black president.
They want him to say publicly to young men, as one black man to another:
Put down your guns.”
- Buffett’s Moody’s Stake May Have Fallen on S&P Lawsuit. Warren
Buffett’s Berkshire Hathaway Inc., owner of the largest stake in
Moody’s Corp., may have lost almost $300 million on the holding this
week as shares of the credit-ratings company plunged. Moody’s, the
second-biggest provider of credit ratings, dropped 19 percent through
yesterday after larger rival Standard & Poor’s said on Feb. 4 that it could face a U.S.
lawsuit over inflated mortgage-bond ratings. Omaha, Nebraska-based
Berkshire held 28.4 million Moody’s shares, or about 13 percent of the
firm, as of Sept. 30, according to data compiled by Bloomberg.
- Geithner to Join Council on Foreign Relations, Publish Book. Timothy
F. Geithner, who ended his term as U.S. Treasury Secretary in January,
will join the Council on Foreign Relations this month and plans to
publish a
book. Geithner, 51, will work for the council as a full-time
distinguished fellow in New York, where the organization is
based, the group said today in two separate emails. He was
previously a senior fellow there in 2001.
CNBC:
- Delivery Cuts Only 'One Step' To Fix Finances: Postmaster General. Ending the Saturday delivery of mail is "just one step in a plan to
resolve our finances," Postmaster General Patrick Donahoe said in an
interview on CNBC. "Going forward we still need legislation to address a
number of things." Donahoe said that this move is necessary due to dropping use of first class mail service. The
U.S. Postal Service announced Wednesday that it will stop delivering
mail on Saturdays but continue to deliver packages six days a week under
a plan aimed at saving about $2 billion annually.
- Recent Libor Settlements Are Just Tip of the Iceberg.
The web of Libor conspirators is growing. Deutsche Bank has suspended
five more traders in conjunction with a widespread investigation into
interest-rate rigging that took place during the
financial crisis and beyond, according to a person familiar with the
matter. The five suspensions come in addition to two traders claimed by
previous iterations of the review, the person said.
Reuters:
- Monte Paschi loss could be up to a billion euros. Board members at
Monte dei Paschi are expected to say on Wednesday that Italy's third
largest bank may have lost up to 1 billion euros on opaque derivatives
trades, far higher than the initial estimate. The trades are at the center of
a probe into former management of the bank which has deepened questions
about the role of banking supervisors and the influence of local
politicians ahead of Feb 24-25 parliamentary elections. A
source close to the situation said the final loss, set to be announced
after the market close on Wednesday, should be somewhere between the
preliminary estimate of around 720 million euros ($974 million) and 1
billion euros.
- Fitch: Lackluster outlook for U.S. casino operators. The 2%
payroll tax cut expiration provides another headwind for an already
lackluster outlook for U.S. casino operators, according to Fitch Ratings. Operators also face cannibalization from new openings in select markets against a difficult macroeconomic backdrop.
-
Italy's Bersani faces choice between Monti and leftist ally. The leader of Italy's centre-left
Democratic Party is facing pressure to ditch his leftist allies
and seek a pact with outgoing premier Mario Monti as a resurgent
Silvio Berlusconi threatens to spoil an election victory that
once seemed assured.
Financial Times:
- Miller maintains an appetite for Apple(AAPL). Investors
have Apple all wrong, according to Bill Miller. The best performing
mutual fund manager last year thanks to big bets on unloved stocks, he
says the world’s largest listed company could be worth 50 per cent more.
Style Underperformer:
Sector Underperformers:
- 1) Oil Service -1.5% 2) Computer Services -1.20% 3) Retail -1.0%
Stocks Falling on Unusual Volume:
- INFN, SU, TNAV, GPOR, CETV, LBTYA, GNW, ING, HK, TOT, VOCS, WNC, DB, VMED, VOCS, WXS, CFX, PER, CHRW, KB, HNI, JIVE, NMM, EXPE, MPEL, WNC, ULTI, GME, VASC, ARUN, GPOR, HAIN, DWA, AFL, GAS, CCOI, HAIN, FBC, CME, USNA, GAS, TRMB, USG and SDT
Stocks With Unusual Put Option Activity:
- 1) EFA 2) DAL 3) XLK 4) CHRW 5) PNRA
Stocks With Most Negative News Mentions:
- 1) PBR 2) KEG 3) WYNN 4) LVS 5) COP
Charts:
