Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 115.0 -8.73%
- Total Put/Call .97 +6.59%
Credit Investor Angst:
- North American Investment Grade CDS Index 79.86 +.48%
- European Financial Sector CDS Index 143.82 +3.48%
- Western Europe Sovereign Debt CDS Index 96.50 -1.12%
- Emerging Market CDS Index 237.22 -.43%
- 2-Year Swap Spread 13.5 -.75 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -16.75 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .09% unch.
- China Import Iron Ore Spot $143.40/Metric Tonne -.49%
- Citi US Economic Surprise Index 21.1 +.1 point
- 10-Year TIPS Spread 2.56 -2 bps
Overseas Futures:
- Nikkei Futures: Indicating -94 open in Japan
- DAX Futures: Indicating -11 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
- Disclosed Trades: Added to my (IWM), (QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- Italy Rates Rise in Auction Amid Vote Concern, Fitch Downgrade. Italian borrowing costs rose today
in the first auction since Fitch Ratings downgraded the nation,
saying inconclusive elections threatened its ability to respond
to the fourth recession since 2001. The Rome-based Treasury auctioned 7.75 billion euros ($10.1
billion) of one-year bills today at 1.28 percent, the highest
since December and up from 1.094 percent at an auction of
similar maturity debt Feb. 12. Attracted by higher rates,
investors bid for 1.50 times the amount offered, up from 1.38
times last month. Today’s sale was probably helped by 8.69
billion euros in bill redemptions this week.
- Bundesbank Almost Doubles Risk Provisions on ECB Measures.
Germany’s Bundesbank almost doubled its risk provisions in 2012, citing
increased potential for losses stemming from the European Central
Bank’s monetary policy. The Frankfurt-based central bank increased
provisions for general risks by 6.7 billion euros ($8.7 billion) to 14.4
billion euros, it said in an e-mailed statement today when
releasing its 2012 annual report.
- U.K. Industrial Output Unexpectedly Falls on Oil, Gas.
U.K. industrial production unexpectedly fell in January as factory
output slumped, fueling concerns that Britain may slip into a triple-dip
recession. Production dropped 1.2 percent from December, when it
jumped 1.1 percent, the Office for National Statistics said today in
London. The median forecast in a Bloomberg News survey of 29 economists
was for a 0.1 percent increase. Manufacturing
declined 1.5 percent. The pound fell.
- Banks’ Debt Addiction Said to Face Scrutiny at Basel Group. A planned international limit on
bank indebtedness will be on the agenda of every meeting of the
Basel Committee on Banking Supervision this year as regulators
seek to wean lenders off their addiction to debt, according to
three people familiar with the talks. Regulators are preparing to fight lenders over the details
of the so-called leverage ratio as they seek to toughen rules on
the minimum amount of capital they must use to back their
investments. The Basel group, which brings together supervisors
from 27 nations, will meet in the Swiss city tomorrow, according
to the people, who asked not to be identified because the
meetings are confidential.
- Junk Bond Puts Jump on Record-Low Yield. (video)
- Beijing’s Rising Rents Squeeze Newcomers Barred From Home Buying. Beijing’s strictest-in-the-nation
property curbs are forcing up rents for about 7.7 million
residents originally from outside of the city who are blocked
from buying a home. The Chinese capital requires new arrivals to wait five
years before purchasing a house, while cities including Shanghai
permit ownership after one year of residency. Beijing introduced
restrictions on non-locals in 2011, followed by about 40 other
cities, part of a three-year, largely unsuccessful campaign by
the central government to contain the growth of property prices.
- China Aluminum Output at Record in January on Capacity Additions.
Aluminum production in China, the biggest producer and user, climbed to
a record in January on capacity additions, data from the National
Bureau of Statistics
showed today. Production was 1.78 million metric tons in January,
according to Bloomberg calculations based on the data. The
figure exceeded the previous record of 1.75 million tons in
August, said Zhang Chenguang, an analyst at SMM Information &
Technology Co. The bureau doesn’t release January output data
alone and may revise previous data without disclosure.
Wall Street Journal:
- GOP Budget Establishes Contrast With Democrats. Republican
budget standard-bearer Paul Ryan on Tuesday offered his party's most
provocative fiscal framework in years, calling for Medicare and Medicaid
overhauls and new limits on
defense spending not previously endorsed by party leaders.
- North Korea Ratchets Up Tension. North
Korea moved to further stoke tensions with South Korea, as state media
reported that Kim Jong Eun instructed his military to be ready to deal
"deadly strikes" while visiting an artillery unit near the Yellow Sea
border that has been the
scene of several clashes between the nations.
- OPEC: U.S. Shale Oil to Cut Into Demand. The Organization of the Petroleum Exporting Countries cut its
forecast of demand for its oil this year, citing growing production from
U.S. shale deposits. If the scaled-back forecast proves correct, OPEC could be on track to
have its lowest share of the global oil market in more than 10 years.
OPEC's move comes as industry experts increasingly question whether the
producers' group, which has had a decisive influence on the oil market
since the 1970s, can maintain its position amid a boom in U.S. oil
production resulting from shale- rock drilling technology.
MarketWatch:
Fox News:
- Amid rising tensions, China says it will send a survey team to disputed islands held by Japan. A Chinese official says Beijing plans eventually to land a survey
team on uninhabited islands at the heart of an increasingly dangerous
territorial dispute with Japan. It was China's
clearest expression yet of an intention to set foot on the islands,
adding to the sharpening rhetoric between the two sides over the
islands, which are controlled by Japan but also claimed by China.
CNBC:
- Small Business Confidence Edges Up Slightly in February.
Small-business owners' confidence improved a bit in February, but
entrepreneurs still aren't feeling a surge of optimism — or hiring.
That's the finding of a monthly survey by the National Federation of
Independent Business. The group said Tuesday that its small-business optimism index edged up 1.9 points to 90.8 points from 88.9 points in January. "While the Fortune 500 are enjoying record high earnings, Main Street
earnings remain depressed," said NFIB chief economist Bill Dunkelberg in
a prepared statement. "Far more firms report sales down quarter over
quarter than up." "Until owners' forecast for the economy
improves substantially, there will be little boost to hiring and
spending from the small business half of the economy," he said.
Zero Hedge:
Business Insider:
Reuters:
- Euro woes not over, says crisis-wary Bundesbank. A
wary German central bank said on Tuesday it had set aside billions more
euros against what it deems risky European Central Bank moves, and
criticized France directly for "floundering" in its reform drives.
Presenting Bundesbank 2012 results, Jens Weidmann, the bank's chief,
said the euro zone crisis, which has eased as a result of ECB funding
promises, was not over. He urged governments to tackle the roots of their troubles with reforms. Weidmann, a member of the ECB's Governing Council, opposed the bank's yet-to-be-used bond-buy plan agreed last September
and believes euro zone governments must shape up their economies to
exit the crisis rather than looking to the ECB for help. "The crisis
that we are facing is a crisis of confidence, and this confidence cannot
be gained if we postpone the tackling of the root causes of the
crisis," he told Reuters in a television interview. Stressing that "the
crisis is not over despite the recent calm on financial markets,"
Weidmann earlier told a news conference there was uncertainty about the
reform course in France, Italy and Cyprus. "The
reform course in France seems to have floundered, in Italy it has been
brought into question by the elections and in Cyprus (which is
struggling to get a bailout) the situation is especially unclear."
- China's Suntech(STP) to close its only US solar panel plant. China-based Suntech Power Holdings Co Ltd said it would close its only solar
panel-making plant in the United States to cut costs, two years after
opening the facility that never reached full production. Shares of the company, struggling to cover a convertible
bond due this Friday, fell 9 percent to $1.05, their lowest in
more than two months.
- U.S. Jan steel exports fall on year on low international demand. January steel exports from
the United States fell by 14.6 percent from the same month last
year due to a decline in international steel demand, an industry
body said on Tuesday. "Steel exports declined to all regions in the year-to-year
comparison as international economic conditions and
steel-related demand sagged," said David Phelps, president of
the steel trade association American Institute for International
Steel. "We are concerned about the direction of the international
marketplace at this point."
Telegraph:
- UK on track for triple dip - NIESR. Britain is on track for a triple dip recession, one of the nation’s leading
forecasters has signalled, as new figures on the UK’s manufacturing industry
dealt a blow to recovery hopes and sent sterling crashing to a fresh
two-and-a-half year low.
The Indian Express:
- Consumer price inflation accelerates to 11% in February. India's annual consumer price inflation (CPI) accelerated to 10.91
percent in February from the previous month, government data showed on
Tuesday. Consumer prices rose an annual 10.79 percent in January. India's
retail inflation is the highest among the BRICS group of emerging
economies - Brazil, Russia, China, and South Africa. Food prices for
consumers rose 13.73 percent in February from 13.36 percent in January.
Style Underperformer:
Sector Underperformers:
- 1) Oil Tankers -1.66% 2) Homebuilders -1.01% 3) I-Banks -.85%
Stocks Falling on Unusual Volume:
- TNAV, DK, LFC, SNFCA, GOV, SHOS, EVER, HMIN, PWRD, AMED, AVG, AAXJ, SLCA, RP, BAM, BVSN, DK, DMND, ESC, AMBA, RHT, ABG, APEI, AKAM, YNDX, CDNS, BIP, GLPW, YY, GES, EXAS and SLCA
Stocks With Unusual Put Option Activity:
- 1) EFA 2) JNK 3) YUM 4) UAL 5) NKE
Stocks With Most Negative News Mentions:
- 1) GS 2) CVS 3) GM 4) AB 5) F
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +2.12% 2) Hospitals +.09% 3) Drugs +.09%
Stocks Rising on Unusual Volume:
- BIOS, DKS, MCRS, IRBT, CAB, PAY, MLNX and JCP
Stocks With Unusual Call Option Activity:
- 1) DF 2) YUM 3) TWX 4) HEK 5) SVNT
Stocks With Most Positive News Mentions:
- 1) JEC 2) ISIL 3) SHW 4) T 5) MOS
Charts:
Evening Headlines
Bloomberg:
- Hollande Hostility Fuels Charm Offensive to Show He’s No Sarkozy. President Francois Hollande, the
most-unpopular French leader in more than 30 years, is
struggling to show supporters he’s not dipping into predecessor
Nicolas Sarkozy’s playbook to reverse an economic slump. The European debt crisis, which is in its fourth year, and
France’s stagnating economy are preventing the Socialist
president from veering too far from efforts advocated by Sarkozy
and Germany’s Angela Merkel to cap the budget deficit, shrink
government spending and push through structural changes.
- Britain Loses to Germany as CDS Rise Most in World: U.K. Credit.
Confidence in U.K. credit is declining the most in the global
sovereign-debt market on concern the economy will fall into its third
recession in five years and force the government to increase borrowing.
Credit-default swaps insuring gilts rose 76% from a more than four-year
low of 26 basis points on Nov. 1, the most among 67 governments tracked
by Bloomberg.
- Donilon Says China Cyber Attacks Hurt Bid for Better Ties. China
is waging a campaign of cyber espionage against U.S. companies that is
threatening to derail President Barack Obama’s second-term effort to
improve ties, National Security Adviser Thomas Donilon said. The widespread theft of intellectual property and trade
secrets through “cyber intrusions emanating from China at a
very large scale” has become a point of contention with the
Chinese government, Donilon said yesterday in a speech at the
Asia Society in New York.
- India Inflation Fight Hampered as Debt Role Hinders RBI. The
biggest critic of India’s $100 billion budget deficit is also one of
the largest purchasers of the debt that finances it: the central bank.
The Reserve Bank of India faults government expenditure for stoking
inflation even as its sovereign-bond holdings have risen to $91 billion
from negligible amounts in 2008. While it has a mandate for price
stability -- like counterparts in the U.S., Europe and Japan -- the RBI
has another charge its peers lack: ensuring the government achieves its
borrowing program.
- U.S. Calls North Korean Threats Hyperbolic. North
Korea’s threats of preemptive nuclear strikes are “hyperbolic,” U.S.
National Security Adviser Thomas Donilon said, as the totalitarian
state’s leader Kim Jong Un told troops to prepare for war. Kim
yesterday told front line units that “every day is a state of war,”
official media reported. North Korea shut down a border hot line and
declared the 1953 armistice ending the Korean War nullified as the U.S.
and South Korea began annual military drills.
- Zinc Declines to 15-Week Low on Chinese Industrial Output. Zinc
prices fell to a 15-week low after industrial output posted the weakest
start to a year since 2009 in China, the world’s biggest user of
industrial metals. Production rose 9.9 percent in the two months ended Feb.
28, trailing estimates by economists, and retail sales fell
short of forecasts. Zinc dropped below its 200-day moving
average, and aluminum, lead, and tin also declined in London.
- Rebar in Shanghai Declines Amid High Inventories, Property Curbs. Steel reinforcement-bar futures in
Shanghai declined as high inventories and property curbs
increased concern that demand may wane. Rebar for delivery in October on the Shanghai Futures
Exchange fell as much as 0.5 percent to 3,890 yuan ($626) a
metric ton and traded at 3,901 yuan at 10:44 a.m. local time.
Wall Street Journal:
- CIA Ramps Up Role in Iraq. As al Qaeda Fighters Cross Over From Syria, Agency Fills Void Left by U.S. Military. The Central Intelligence Agency is ramping up support to elite Iraqi
antiterrorism units to better fight al Qaeda affiliates, amid alarm in
Washington about spillover from the civil war in neighboring Syria,
according to U.S. officials. The stepped-up mission expands a covert U.S. presence on the edges of
the two-year-old Syrian conflict, at a time of American concerns about
the growing power of extremists in the Syrian rebellion.
- Paul Ryan: The GOP Plan to Balance the Budget by 2023. The goal can be reached, with no new taxes, while increasing spending 3.4% annually instead of the current 5%. America's national debt is over $16 trillion. Yet Washington can't
figure out how to cut $85 billion—or just 2% of the federal
budget—without resorting to arbitrary, across-the-board cuts. Clearly,
the budget process is broken. In four of the past five years, the
president has missed his budget deadline. Senate Democrats haven't
passed a budget in over 1,400 days. By refusing to tackle the drivers of
the nation's debt—or simply to write a budget—Washington lurches from
crisis to crisis.
Fox News:
- Dozens of WH senior staffers making six-figure salaries amid sequester woes. After closing the doors to public tours in an effort to save money,
White House officials haven't yet said if sequester cuts will result in
furloughs or layoffs for its senior staffers -- as is happening with
rank-and-file in other executive branch agencies. But there are dozens of senior employees and other presidential
"assistants" to choose from if the administration were to look at
cutting the six-figure salaries from its payroll. In the field of energy and climate change alone, President Obama in
2012 employed three advisers making at least $100,000 -- though one has
since left. The president kept on staff a "deputy assistant" for energy and
climate change, Heather Zichal, making $140,000; a "special assistant"
for energy and environment, Nathaniel Keohane; and a "deputy director"
for energy and climate change, Dan Utech. Together, their salaries totaled over $370,000 last year, according to White House records. Climate blogger Steven Goddard said it's unlikely the administration
will scale back its circle of advisers, at least on this issue.
- Lawmaker looks to rein in program after free cell phones sent to dead people. That’s the message Rep. Tim Griffin of Arkansas wants to send Congress,
after he says a controversial government-backed program that helps
provide phones to low-income Americans ended up sending mobiles to the
dead relatives of his constituents. Griffin has introduced a bill that
targets the phone hand-out program, which has ballooned into a fiscal
headache for the government.
CNBC:
- This Could Spark China's Arab Spring. With half a billion and counting registered users on China's
Twitter-like micro blogging website Sina Weibo, the country's
increasingly vocal army of netizens could be among the biggest
challenges facing the world's second largest economy's new leadership,
which officially assumes power this month.
Zero Hedge:
Business Insider:
NY Times:
- On the Brink in Italy. Businesses of all sizes have been going belly up at the rate of 1,000 a
day over the last year; especially hard hit among Italy’s estimated six
million companies are the small and midsize companies that represent the
backbone of Italy’s $2 trillion economy.
Economists worry that the pace of business closings may accelerate as long as the country lacks a functioning government.
DealBreaker:
Reuters:
- China politics keep central bank hawks at bay, for now. Intense
lobbying by central government agencies and debt-laden local
governments is keeping People's Bank of China hawks in check after
inflation jumped to a 10-month high, forcing the central bank to keep
its monetary policy setting in neutral.
- U.S. Congress urged to pass vote changes for IMF. More than 130 academics and
global policy pundits urged the U.S. Congress on Monday to enact
delayed changes in voting powers in the International Monetary
Fund and warned that failure to do so would diminish U.S.
influence in the global financial lender.
Financial Times:
- Facebook(FB) reveals secrets you haven’t shared.
The increasing amount of personal information that can been gleaned by
computer programs that track how people use Facebook has been revealed
by an extensive academic study. Such programmes can discern undisclosed private information such as
Facebook users’ sexuality, drug-use habits and even whether their
parents separated when they were young, according to the study by
Cambridge university academics.
Telegraph:
Globe and Mail:
- Sales of subprime car-loan securities soar. Sales of risky pools of securities backed by car loans have jumped
this year as investors’ search for yield takes them to corners of the
market that boomed in the build-up to the financial crisis. Sales
of subprime auto asset-backed securities have increased year-to-date to
nearly $4-billion (U.S.), almost double the volume during the same
period of 2012, according to Deutsche Bank data. Subprime auto sales now
account for 34 per cent of all auto ABS issuance, surpassing levels
last seen in 2007.
Shanghai Securities News:
- China's Jiangsu Shagang Group Cuts Steel Prices. Co. cuts prices
for its threaded steel products by 250 yuan a ton to 3,800 yuan a ton as
construction-use steel product prices dropped substantially after the
State Council announced detailed property curbs. The newspaper also
cited rising inventories at steel companies.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 100.0 unch.
- Asia Pacific Sovereign CDS Index 79.75 +.5 basis point.
- NASDAQ 100 futures -.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- The NFIB Small Business Optimism Index for February is estimated to rise to 90.0 versus 88.9 in January.
10:00 am EST
- JOLTs Job Openings for January are estimated to rise to 3670 versus 3617 in December.
Upcoming Splits
Other Potential Market Movers
- The German CPI report, Greece Industrial Production report, weekly
retail sales reported, 3Y T-Note auction, Piper Jaffary
Tech/Media/Telecom Conference, Barclays Healthcare Conference, BofA
Consumer/Retail Conference and the (CVX) analyst meeting could also
impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity 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: About Even
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 129.0 +14.16%
- Total Put/Call .91 +1.11%
Credit Investor Angst:
- North American Investment Grade CDS Index 79.5 -1.32%
- European Financial Sector CDS Index 138.99 +.16%
- Western Europe Sovereign Debt CDS Index 97.63 +1.29%
- Emerging Market CDS Index 238.42 -.24%
- 2-Year Swap Spread 14.25 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -16.5 unch.
Economic Gauges:
- 3-Month T-Bill Yield .09% unch.
- China Import Iron Ore Spot $144.10/Metric Tonne -1.5%
- Citi US Economic Surprise Index 21.0 -.1 point
- 10-Year TIPS Spread 2.58 unch.
Overseas Futures:
- Nikkei Futures: Indicating +85 open in Japan
- DAX Futures: Indicating unch. open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/medical sector longs and emerging markets shorts
- Disclosed Trades: None
- Market Exposure: 50% Net Long
