Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 91.0 +12.35%
- Total Put/Call 1.13 unch.
Credit Investor Angst:
- North American Investment Grade CDS Index 888.35 +.91%
- European Financial Sector CDS Index 150.23 +5.63%
- Western Europe Sovereign Debt CDS Index 101.19 +2.21%
- Emerging Market CDS Index 237.31 +.84%
- 2-Year Swap Spread 15.50 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -18.0 -1.0 bp
Economic Gauges:
- 3-Month T-Bill Yield .12% unch.
- China Import Iron Ore Spot $156.20/Metric Tonne -1.70%
- Citi US Economic Surprise Index -4.70 -1.0 point
- 10-Year TIPS Spread 2.53 -2 bps
Overseas Futures:
- Nikkei Futures: Indicating -51 open in Japan
- DAX Futures: Indicating +11 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
Bloomberg:
- Euro-Area Manufacturing, Services Contraction Worsens: Economy. Euro-area services and manufacturing contracted at a faster pace than
economists forecast in February as the economy struggled to recover from the deepest recession in almost four years. A
composite index based on a survey of purchasing managers in both
industries in the 17-nation currency bloc decreased to 47.3 from 48.6 in
January, London-based Markit Economics said today. Economists had forecast a reading of 49,
according to the median of 22 estimates in a Bloomberg survey. The data
reinforce indications that the euro-area economy continued to contract
in early 2013 after the recession worsened in the fourth quarter. The
manufacturing gauge slipped to 47.8 from 47.9. In Germany, Europe’s
biggest economy, the services measure fell to 54.1 in February from 55.7
last month, the sharpest decline since August. France’s services gauge
fell to 42.7 this month from 43.6 in January, while its
manufacturing index increased to 43.6 from 42.9, today’s data showed.
- European Stocks Decline Most in Two Weeks on Fed, Economy.
European (SXXP) stocks declined the most in more than two weeks as a
measure of services and manufacturing output contracted, while concern
mounted that the Federal Reserve will scale back its asset-purchase
program. All 19 industry groups in the Stoxx Europe 600 Index retreated with a gauge of carmakers dropping 2.5 percent.
BHP Billiton Ltd., the world’s biggest mining company, posted its
largest two-day drop in more than nine months. Safran SA slid the most
since August after saying it may make an offer for Avio SpA’s
space-propulsion business. The Stoxx 600 sank 1.5 percent to 284.86 at the close of trading in London, its biggest tumble since Feb. 4.
- Euro Weakens Below $1.32 First Time in Six Weeks as Output Drops. The
euro declined below $1.32 for the first time in six weeks as an
industry report showed services and manufacturing in the region shrank
at a faster pace
in February than economists forecast.
- China Swaps Touch Two-Week High on Record PBOC Fund Withdrawals. China’s
one-year interest-rate swaps touched a two-week high on speculation the
central bank will tighten monetary policy to temper gains in home
prices. Premier Wen Jiabao called on local authorities to
“decisively” curb real estate speculation and take steps to
rein in the property market after data showed prices surged the
most in two years last month. The People’s Bank of China drained
910 billion yuan ($146 billion) from the financial system this
week, the biggest withdrawal since Bloomberg started compiling
the data in 2008. “It shows determination of the central bank to tighten
liquidity conditions as they need to guard against nascent
inflation and asset-price gains, especially in real estate,”
said Dariusz Kowalczyk, a Credit Agricole CIB strategist in Hong
Kong.
- Emerging Stocks Erase Gains for 2013 Year as Earnings Disappoint. Emerging-market
stocks erased gains for the year, underperforming developed-nation
equities as earnings at companies from Hyundai Motor Co. (005380) to
Petroleo Brasileiro SA (PETR4) trailed analysts’ forecasts. The MSCI
Emerging Markets Index (MXEF) fell 1.3 percent to 1,055.02 as of 4:45
p.m. in Hong Kong, wiping out this year’s advance. The gauge has fallen
2.6 percent from a 17-month high on Jan. 3 as 62 percent of the
companies included reported quarterly profit that missed estimates,
compared with 34 percent in the MSCI World Index of developed nations.
- Emerging Stocks Face Significant Correction, JPMorgan Says. Emerging-market stocks may enter a “significant
correction” after they trailed developed-nation shares this year,
according to JPMorgan & Chase Co. “Fundamentals and technicals
are weakening,” Adrian Mowat, the chief Asia and emerging-market
strategist at JPMorgan, wrote in a report dated yesterday. He
recommended options that protect against
stock losses and advised selling equities that are most sensitive to
market swings.
- Insider Sales Reach 2-Year High as S&P 500 Nears Record. Corporate executives are taking
advantage of near-record U.S. stock prices by selling shares in
their companies at the fastest pace in two years. There were about 12
stock-sale announcements over the past three months for every purchase
by insiders at Standard & Poor’s 500 Index (SPX) companies, the
highest ratio since January 2011, according to data compiled by
Bloomberg and Pavilion Global
Markets. Whenever the ratio exceeded 11 in the past, the
benchmark index declined 5.9 percent on average in the next six
months, according to Pavilion, a Montreal-based trading firm.
- Hedge Funds Boost Stock Bets to ’07 High, Goldman Says. Hedge funds are more bullish on equities than they have been in six years
and American International Group Inc. (AIG) replaced Apple (AAPL) Inc.
as the top-held stock, according to Goldman Sachs Group Inc. Net long
exposure to stocks in hedge funds climbed to 52 percent in the fourth
quarter, matching the 10-year high reached in the first quarter of 2007, a team led by Goldman Sachs’ Amanda Sneider and David Kostin said in a report yesterday.
- Iron-Ore Swaps Drop as China Property Curbs Seen Cutting Demand. Iron-ore swaps dropped the most in
almost six weeks alongside declines in steel futures and
equities on speculation China’s call for real-estate curbs would
curb demand for the commodity used in construction materials. The March contract tumbled 2.6 percent to $148.50 a dry
metric ton as of 8:26 a.m. in London, according to GFI Group
Inc. It headed for the biggest decline since Jan. 11, based on
data from SGX AsiaClear, the largest clearer of the derivatives
used to hedge prices and bet on Chinese growth.
- Wheat Leads Slump as Nickel to Crude Fall: Commodities at Close. Copper, tin and nickel fell to the lowest this year on
signs of a deepening slump in Europe and concern that the
Federal Reserve will slow the pace of economic stimulus in the
U.S. Copper futures for May delivery slumped 1.7 percent to
$3.5625 a pound at 10:28 a.m. on the Comex in New York after
touching $3.5585, the lowest since Dec. 24.
- Index of U.S. Leading Economic Indicators Rose in January. The index of U.S. leading indicators rose for a second month in
January, showing the world’s largest economy is on track to sustain the
expansion in the first half of this year. The Conference Board’s
gauge of the outlook for the next three to six months increased 0.2
percent from a 0.5 percent rise in December, the New York-based group
said today. The gain matched the increase projected by economists,
according to the median estimate in a Bloomberg survey.
- Previously Owned U.S. Home Sales Climb to 4.92 Million.
Purchases of existing houses rose 0.4 percent to a 4.92 million annual
rate, figures from the National Association of Realtors showed today in
Washington.
- Consumer Bureau Said to Warn Banks of Auto Lending Suits. The U.S. Consumer Financial
Protection Bureau has told at least four banks that it may sue
them over vehicle loans and interest-rate markups by auto
dealers that appear discriminatory, according to three people
briefed on the matter. The banks received letters from the CFPB last week giving
them 15 days to provide an explanation of the practice, said the
people, who asked not to be identified because the plans aren’t
public. The letters indicate the bureau believes the banks may
have violated the Equal Credit Opportunity Act, a 1974 law that
bars discrimination in lending.
Wall Street Journal:
MarketWatch:
- Fed's Bullard: Current policy looks very easy. Federal Reserve policy looks "very easy" and is below one of the Fed
favorite guideposts for policy, said James Bullard, the president of the
St. Louis Federal Reserve Bank on Thursday. In a speech at the New York
University School of Business, Bullard said that one estimate of policy
puts the Fed's short-term rate at negative 5%, considerably more
negative than the Taylor rule that the central bank often used before
the crisis to gauge policy. The Taylor rule and St. Louis Fed forecasts
suggest that rates should increase above zero in August, Bullard said.
But some analysts suggest that the Fed would want to keep rates at zero
for an "extra time" to make up for having rates at zero since 2008.
Bullard said Fed policy is consistent with the extra time approach.
Bullard repeated that he backed tapering asset purchases to send signals
to the market about the economy's progress.
- Iran Lifts Output, Upgrades Atomic Technology Before Meeting. Iran rolled out new atomic
technology and boosted its output of enriched uranium that world
powers are concerned may eventually be used for nuclear weapons,
according to the International Atomic Energy Agency. Iran’s total production of medium-enriched uranium rose to
280 kilograms (617 pounds) from 232.8 kilograms reported in
November, the IAEA said today in a 12-page restricted report.
Iran has converted or is in the process of converting 103
kilograms, or 37 percent of the stockpile, into reactor fuel,
which Iran has declared is for producing medical isotopes.
CNBC:
- Italy's Election: Tycoon, Comedian or Professor.
- Strike Three! The American Consumer Is Out. Faced with delayed tax refunds, an increased paycheck tax bite and
higher gas prices, U.S. consumers are proceeding cautiously and scaling
back, a trend that has already impacted one large retailer's bottom
line. Nearly three-quarters of those polled by the National Retail
Federation said their spending plans are taking a hit due to the
expiration of a two-percent cut in payroll taxes that made consumers do a
double-take on their paychecks at the start of the year. Lower-income
consumers are already feeling the pinch, analysts said.
Zero Hedge:
Business Insider:
New York Times:
Reuters:
- Italy election stalemate worst option for markets. An inconclusive result in Italy's
elections this weekend could prompt an even bigger sell-off in
some markets than the return to power of scandal-mired Silvio
Berlusconi, who led the country to the financial precipice in
2011.
- Moody's outlook for US local governments remains negative. Moody's Investors Service is
keeping its outlook negative for U.S. local governments in 2013,
as cities and counties must continue to contend with tight
revenues, high demand for spending, and an "uneven economic
recovery," the rating agency said on Thursday.
Telegraph:
BBC:
- Libor setting 'still not clean' despite scandal. The way that the key Libor interest
rate is set in the UK is still not clean and free of fraud, according to a top
US regulator. "We have a lot more work to do," Gary Gensler, chairman of the Commodity
Futures Trading Commission, told the BBC in London. He suggested that the rate was often "completely made up".
Naftemporiki:
- Greek Revenue Misses Target So Far This Month. State revenue in
first 15 days of month seen at EU1.174b vs. EU1.365b target, citing
preliminary finance ministry data.
Style Underperformer:
Sector Underperformers:
- 1) Alt Energy -3.55% 2) Oil Service -2.52% 3) Networking -2.13%
Stocks Falling on Unusual Volume:
- PAY, SFY, TVL, TPLM, BOFI, IRE, TI, DISH, PBR, GFI, OMX, FBR, CBD, FOR, VAC, MX, TAL, PATK, EBIX, LBY, TSLA, CG, KORS, PPO, KMP, AZZ, NSR, GNRC, SWKS, TRW, DORM, BRC, BOFI, AMWD, HSNI, HAIN, DDD, PPO, LL, SPWR, WLT, RNF, WGO, SPPI, VCI, URI, NCT, RP, MCRS, RES, HEES, CLH, CQP, PCG, NRP, CACI, GPOR and SAFM
Stocks With Unusual Put Option Activity:
- 1) MTG 2) OIH 3) XLV 4) JCP 5) GM
Stocks With Most Negative News Mentions:
- 1) CLF 2) RIG 3) SKYW 4) POT 5) R
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +2.98% 2) Tobacco +.69% 3) Papers +.29%
Stocks Rising on Unusual Volume:
- SWY, JCP, PAAS, JACK, AUY, BRY, GDP, PEGA, RPRX, AWAY, SM and CROX
Stocks With Unusual Call Option Activity:
- 1) NWS 2) PAY 3) WMB 4) ODP 5) UUP
Stocks With Most Positive News Mentions:
- 1) KO 2) WLP 3) AOL 4) HRL 5) SWY
Charts:
Evening Headlines
Bloomberg:
- Bersani Preaches Spread-the-Wealth Before Italian Vote. Pier
Luigi Bersani is traveling from Palermo to Naples with a
spread-the-wealth message to fend off populist rival Beppe Grillo in two
poor regions pollsters say are vital to gaining control of Italy’s
Senate. With outright victory at stake in the Feb. 24-25 parliamentary
election, Bersani, 61, is set to appear in Naples, capital of the
southern region of Campania, after speaking to thousands in Sicily’s
biggest city yesterday. He has covered the length of the Italian
peninsula this week to rally voters in the three must-win regions of
Lombardy, Sicily and Campania. Victory in Campania and Sicily, two of
Italy’s poorest regions, is in doubt as former comic Grillo’s
anti-austerity message resonates with recession-scarred voters. Bersani
drew cheers from flag-waving supporters in Palermo’s Piazza Verdi when
he said he’d push to get more out of the wealthy. Still, his base of
union supporters may not be enough to stop Grillo from carrying Sicily.
Victory by Grillo in Sicily is “a concrete possibility,” said Roberto
D’Alimonte, a professor at Rome’s Luiss University
who does political analysis for Sole 24 Ore, Italy’s leading
business newspaper.
- China Stocks Fall Most in 8 Months on Property, Commodity Risk.
China’s stocks fell, sending the benchmark index to its biggest loss in
eight months, after the government told local authorities to curb real
estate speculation and commodity shares tumbled. Anhui Conch Cement
Co. (600585), the nation’s biggest producer of the building material,
slumped 5.5 percent on concern over real estate restrictions that
include home-price control targets and the expansion of a property tax.
China Construction Bank Corp. (601939), the largest mortgage lender,
slid the most since June. Jiangxi Copper Co. and PetroChina Co. led
declines for metal and energy stocks after minutes from the Federal
Reserve’s last meeting
showed debate over further stimulus action. The Shanghai Composite
Index (SHCOMP) retreated 2.7 percent to 2,331.61 at the 11:30 a.m.
break, heading for the biggest drop since June 4. The CSI 300 Index
(SHSZ300) dropped 3.3 percent to 2,614.86,
the most since November 2011.
- PBOC Switch to Drain Cash Turns Citigroup Bearish.
The People’s Bank of China’s first draining of cash since June, seeking
to damp a property-market revival, is prompting Citigroup Inc. (C) to
predict one-year yields will rise faster than longer-term rates. “The PBOC regards the current liquidity conditions as
overly loose,” said Weisheng He, a strategist in Shanghai at
Citigroup. “Going into April, I expect the bond curve to bear-
flatten,” he said, predicting the one-year yield will rise to 3
percent this year from 2.70 percent yesterday. The outlook for a flattening yield curve reflects the risks
that excessive lending may fuel inflation in the world’s second-
largest economy and lead to a property-market bubble.
- China Aluminum Stockpiles Seen at Record, Swelling Global Glut.
Aluminum inventories in China’s main trading regions are estimated to
have climbed to a record as supply growth outpaces demand in the largest
user and producer, adding to a global glut of the lightweight metal.
Reserves expanded to 1.119 million metric tons from 750,000 tons a year
ago, according to a survey of warehouses in four cities by data provider
SMM Information & Technology Co. Stockpiles in six hubs including
Shanghai increased to 1.156 million tons, according to Li Xun, an
analyst at Myyouse.com, researcher Mysteel.com’s sister website, citing
their survey. The estimates add to signs that surging supplies from
new capacity in China’s northwest are not being absorbed, and may weigh
on aluminum, which has declined 6.7 percent in London in the past year.
Global production will outpace demand by 1.82 million tons this year
from 1.49 million tons in 2012, Barclays Plc said on Feb. 15, advising
investors to bet on lower prices
of the metal used to make autos, appliances and packaging. “I have no
doubt that the inventories will expand
further,” Wang Chunhui, a Shanghai-based analyst at SMM, said
in a telephone interview on Feb. 19. “Maybe it can exceed 1.2
million tons this year.”
- Rebar Futures Fall for Second Day on China Property Curbs. Steel reinforcement-bar futures in
Shanghai fell for a second day as the Chinese government moved
to curb property speculation, reducing demand for the building material. Rebar
for delivery in October fell by as much as 2.1 percent to 4,082 yuan
($653) a metric ton on the Shanghai Futures Exchange, before trading at
4,093 yuan at 10:02 a.m. local time. The contract has dropped 4.3
percent this week as
investors returned to the market after the Lunar New Year
holiday.
- Copper Slides to Seven-Week Low as Metals Fall on China Concern.
Copper slumped to a seven-week low
and nickel tumbled to the lowest level in 12 weeks after China moved to
curb property speculation and Federal Reserve minutes showed a debate
over the stimulus. Aluminum, lead, zinc, and tin
also declined. Copper for delivery in three months lost as much as 0.8
percent to $7,900 a metric ton on the London Metal Exchange, the
lowest since Dec. 31, before trading at $7,935 at 10:11 a.m.
Shanghai time. Nickel dropped as much as 1.9 percent to $16,840
a ton, the lowest since Nov. 28.
Chinese Premier Wen Jiabao called on local authorities to
“decisively” curb real estate speculation and take steps to
rein in the property market after data showed prices surged the
most in two years last month.
- Commodities Tumble on Speculation Hedge Fund Selling Positions.
“You have a sort of mini perfect storm hitting commodities
today,” Dave Lutz, the head of exchange-traded fund trading and strategy
at Stifel Nicolaus & Co. in Baltimore, said in a telephone
interview. “There’s market chatter that a fund is
blowing up, gold has fallen below $1,600, and oil storage tanks
in Cushing are near all-time records.”
- Asset Freezes Among Steps Obama Urged to Take on Cyber Thieves. President Barack Obama must take
tougher actions than those specified so far to deter cyber
attacks on vital computer networks, including freezing
offenders’ assets or denying them entry into the U.S.,
cybersecurity experts said. Obama’s administration yesterday pledged to share more
intelligence with companies about nations involved in economic
espionage and methods used to steal corporate information, and
to study the need for stronger U.S. laws against trade-secret
theft.
- VeriFone(PAY) Plunges After Profit Forecast Trails Estimates. VeriFone
Systems Inc. tumbled as much as 35 percent after the maker of
credit-card terminals forecast second-quarter profit that missed
analysts’ estimates, amid weak economic conditions in Europe. The shares
plunged as low as $20.81 in extended trading, after earlier falling 3.5
percent to $31.89 at the close in New York. Earnings excluding some
items will be 45 cents to 50 cents a share in the quarter ending in
April, San Jose, California- based VeriFone said in a statement.
Analysts on average had predicted profit of 80 cents a share,
according to data compiled by Bloomberg. VeriFone also announced
preliminary first-quarter adjusted profit of 47 cents to 50 cents a
share, less than the company’s prior projection of as much as 73 cents.
Beyond Europe, VeriFone said it experienced lower than anticipated
sales from customers in Brazil, and also had an increase in deferred
revenue from clients in Africa and the Middle East.
Wall Street Journal:
- Fed Split Over How Long To Keep Cash Spigot Open. Federal Reserve officials, uneasy with potential risks springing from
the central bank's low-interest-rate policies, are split over an early
retreat from the experimental programs created to revive the U.S.
economy. Minutes released Wednesday from the
Fed's January policy meeting show officials concerned that the
current
easy-money policies could lead to excessive risk-taking and instability
in financial markets. The Fed is buying $85 billion in mortgage and U.S.
Treasury securities a month to drive down long-term rates and has
promised to keep short-term rates near zero until unemployment improves.
Some said the Fed might have to taper its controversial bond buying
before the job market fully recovers, according to the January minutes.
The Fed has previously allowed bond buying programs to end in this
recovery and then restarted them. It will review the programs at its
next meeting, March 19-20, setting the stage for another high-stakes
debate.
- European Banks Move to Boost Health Gauge. Big European banks are boosting a key gauge of their financial health
through largely cosmetic maneuvering, even as regulators in some
countries try to crack down on the practice. Banks are recalculating the risks in their loan portfolios and
trading books in flattering ways, a move that has the effect of raising
their ratio of capital to "risk-weighted" assets—a metric that investors
and regulators use to assess banks' abilities to absorb unexpected
losses. While such maneuvering has been going on for years, analysts say it
appears to be accelerating at some major European banks, which are under
pressure to raise their capital ratios as new regulations known as
Basel III start phasing in this year.
- Google(GOOG) Developing Touchscreen Devices Using Chrome Operating System. Google Inc. has developed the first touchscreen laptops powered by its Chrome operating system to be sold later this year, according to people familiar with the matter, as the Internet giant tries to go toe-to-toe with Microsoft Corp.'s Windows operating system. Interestingly, the new Chrome devices also would compete with devices powered by Google's other operating system, called Android, which took the smartphone and tablet market by
storm in recent years, propelling Google as a force in mobile-device
software.
- GE(GE) Sues Whirlpool(WHR) on Cartel. General Electric Co. has sued rival Whirlpool Corp. and two European
suppliers, saying the companies ran a price-fixing cartel that caused GE
to overpay for parts for its refrigerators. GE alleges that it
was hurt by an international conspiracy to set prices at
"supra-competitive levels," to decrease manufacturing capacity and to
limit product availability by a group of global manufacturers of
refrigerator compressors. Compressors create cold air that keeps food
fresh or frozen in refrigerators.
- U.S. Ups Ante for Spying on Firms. China, Others Are Threatened With New Penalties. The White House threatened China and other countries with trade and
diplomatic action over corporate espionage as it cataloged more than a
dozen cases of cyberattacks and commercial thefts at some of the U.S.'s
biggest companies.
- Companies Seek to Avoid China New Year Hangover. For the world's manufacturers, post-holiday no-shows are an increasingly
frustrating part of China's tightening labor market. The trend reflects
rising expectations among China's workers, who are seeking out higher
pay even as they show less inclination to work in factories. Many
workers use the break to look for new jobs or start families.
- ObamaCare's 'Baby Elephant'. John Kasich says Valerie Jarrett promised, and other Medicaid tales. On Wednesday Florida Republican Rick Scott became the latest GOP
Governor to volunteer to shoulder some responsibility for ObamaCare,
which has liberal sages gloating about a resistance-is-futile shift in
the GOP. The media don't want to discuss the substance, only the
politics, so allow us to report how the flippers are justifying their
flips.
CNBC:
Zero Hedge:
Business Insider:
Washington Post:
- Japan’s Prime Minister Shinzo Abe: Chinese need for conflict is ‘deeply ingrained’. China has a “deeply ingrained” need to spar with Japan and other Asian neighbors over territory, because the ruling Communist Party uses the disputes to maintain strong domestic support,
Japanese Prime Minister Shinzo Abe said in an interview. Clashes with
neighbors, notably Japan, play to popular opinion, Abe said, given a
Chinese education system that emphasizes patriotism and “anti-Japanese
sentiment.” Abe’s theory on the entrenched motivation behind China’s
recent naval aggression helps explain why he has spent more effort
trying to counter the Chinese than make peace with them: He thinks the fierce dispute with China over an island chain in the East China Sea isn’t going away anytime soon.
NY Times:
- White House Tactic for C.I.A. Bid Holds Back Drone Memos.
The White House is refusing to share fully with Congress the legal
opinions that justify targeted killings, while maneuvering to make sure
its stance does not do anything to endanger the confirmation of John O.
Brennan as C.I.A. director.
4-traders:
- Ineffective Communication Hurts Brazil's Credibility -Moody's. Brazil's government is reaching for more flexibility in its fiscal and
monetary policies, but it hasn't been able to communicate effectively
with the market, causing confusion and hurting credibility, according to
Moody's Investors Service Vice President Mauro Leos.
Reuters:
- Cheesecake(CAKE) Factory's profit misses Street, shares down. Restaurant chain The Cheesecake Factory
Inc forecast a current-quarter profit largely below
analysts' estimates after reporting weaker-than-expected results
for the last quarter, sending its shares down more than 3
percent after the bell.
- Fluor(FLR) revenue short of estimates, has loss on ruling.
Engineering company Fluor Corp on Wednesday reported
slower-than-expected revenue growth and a quarterly loss due to a $265
million charge for the Greater Gabbard wind project off the coast of
Britain. Shares of Fluor, the largest publicly traded U.S. engineering
company, dropped 2 percent in after-hours trading
following a 3 percent slide in the regular session on the New
York Stock Exchange.
Financial Times:
- Fed doubtful on open-ended QE3 policy. The
US Federal Reserve is cooling on open-ended asset purchases as
officials grow nervous about the dangers of a bigger balance sheet.
According to the minutes of its January meeting, released on Wednesday,
“many” officials are concerned about the costs and risks of further
asset purchases, as the Fed buys securities at a
pace of $85bn a month. The
minutes suggest that QE3 – as the Fed’s third round of quantitative
easing is known – could end earlier than previously thought and is no
longer a truly open-ended programme. The Fed’s balance sheet has reached
$3.078tn and could exceed $4tn if QE3 continues for the rest of the
year.
Eastday.com:
Evening Recommendations
Night Trading
- Asian equity indices are -2.25% to -1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.25 -.25 basis point.
- Asia Pacific Sovereign CDS Index 82.5 -.5 basis point.
- NASDAQ 100 futures -.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Consumer Price Index for January is estimated to rise +.1% versus unch. in December.
- The CPI Ex Food & Energy for January is estimated to rise +.2% versus a +.1% gain in December.
- Initial Jobless Claims are estimated to rise to 355K versus 341K the prior week.
- Continuing Claims are estimated to rise to 3150K versus 3114K prior.
8:58 am EST
- The Preliminary Markit US PMI for February is estimated to fall to 55.5 versus 55.8 in January.
10:00 am EST
- Philly Fed for February is estimated to rise to 1.1 versus -5.8 in January.
- Existing Home Sales for January are estimated to fall to 4.9M versus 4.94M in December.
11:00 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,000,000 barrels versus a +560,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -900,000 barrels versus a
-803,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -1,800,000 barrels versus a -3,677,000 barrel
decline the prior week. Finally, Refinery Utilization is estimated to
fall by -.4% versus a -.4% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, Fed's Bullard speaking, Fed's Williams speaking, Eurozone manufacturing & services PMI data, Spain 10Y
bond auction, China home price data, Bloomberg Economic Expectations
Index for February, weekly Bloomberg Consumer Comfort Index, weekly EIA
natural gas inventory report, 4Q Mortgage Delinquencies report and the 4Q Mortgage Foreclosures report could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity 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: Substantially Lower
- Sector Performance: Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 83.0 -16.16%
- Total Put/Call 1.13 +14.14%
Credit Investor Angst:
- North American Investment Grade CDS Index 87.59 +2.57%
- European Financial Sector CDS Index 142.37 -.31%
- Western Europe Sovereign Debt CDS Index 99.0 -.77%
- Emerging Market CDS Index 235.06 +1.92%
- 2-Year Swap Spread 15.50 +.5 bp
- TED Spread 17.25 -1.5 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -17.0 +.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .12% +2 bps
- China Import Iron Ore Spot $158.90/Metric Tonne +.57%
- Citi US Economic Surprise Index -3.70 -1.2 points
- 10-Year TIPS Spread 2.55 -2 bps
Overseas Futures:
- Nikkei Futures: Indicating -38 open in Japan
- DAX Futures: Indicating +3 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/retail/medical sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, added to my equity-specific hedges
- Market Exposure: Moved to 25% Net Long
