Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 69.0-11.5%
- Total Put/Call 1.09 +5.83%
Credit Investor Angst:
- North American Investment Grade CDS Index 87.95 -1.47%
- European Financial Sector CDS Index 179.05 -.11%
- Western Europe Sovereign Debt CDS Index 103.19 -.64%
- Emerging Market CDS Index 258.88 -1.59%
- 2-Year Swap Spread 15.25 -.75 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -18.25 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- China Import Iron Ore Spot $135.90/Metric Tonne +.22%
- Citi US Economic Surprise Index 5.40 -3.0 points
- 10-Year TIPS Spread 2.49 unch.
Overseas Futures:
- Nikkei Futures: Indicating +450 open in Japan
- DAX Futures: Indicating +22 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/medical/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Draghi Signals ECB Stands Ready to Ease Policy If Needed. European
Central Bank President Mario Draghi said the bank stands ready to cut
interest rates if the economy deteriorates further, and officials are
considering additional measures to boost growth as the debt crisis
enters its fourth year. “Our monetary policy stance will remain
accommodative for as long as needed,” Draghi said at a press conference
in Frankfurt today after the ECB kept its benchmark interest rate at a
record low of 0.75 percent. “We will assess all the incoming data in the
coming weeks and we stand ready to act.”
- European Stocks Drop for a Second Day on Draghi Comments. European
stocks retreated, posting the biggest two-day slump in more than four
months, as European Central Bank President Mario Draghi said that the
economic recovery in the euro area remains subject to downside risks.
Banca Generali (BGN) SpA lost 5.1 percent after Assicurazioni Generali
SpA sold part of its stake in the lender. European Aeronautic, Defence
& Space Co. dropped 2.7 percent as an investor offered to sell
shares worth 384 million euros ($494 million) in the owner of Airbus
SAS. BTG Plc (BTG) gained 1 percent
after increasing its sales forecast for 2013. The benchmark Stoxx Europe 600 Index (SXXP) declined 1.1 percent to 291.71 at the close in London.
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
Dallas Business Journal:
- Job cuts in March are up 30 percent over a year ago. March saw 49,255 job cuts announced by the nation's employers, but
that's down from the number announced in February, according to a report
from outplacement consultancy Challenger, Gray & Christmas Inc. Challenger said 55,356 jobs were cut in February. Quarterly job cuts
were the highest since 2011, Challenger said. The job cuts in March were
an increase of 30 percent over March 2012, when companies announced
plans to trim 37,880 workers.
Telegraph:
Les Echos:
- France is shooting itself in the foot by backing transaction tax proposed by EU, Paul-Henri de La Porte du Theil, Chairman of French asset managers association AFG, said. Proposed tax on transactions of shares, bonds and derivatives may cost French asset managers EU6b, including EU4b for money market funds.
Expansion:
- Europe May Force Losses on Covered Bonds in Bailouts. Europe may
consider forcing losses on covered bond investors in future bank
rescues. If a bond is worth more than the assets that guarantee it, it
should be possible to apply haircut to the part not covered, citing
Sharon Bowles, chairwoman of European Parliament's economic and monetary
affairs committee.
Xinhua:
- China reports 5th death from H7N9 bird flu. Authorities in Shanghai said Thursday night that
another person has died from H7N9 bird flu, bringing the death toll from
the new deadly strain to five around the country. The city has
reported six infections to date, and four have died,
said the Shanghai Municipal Health and Family Planning Commission. Of
the rest two, there was a four-year-old, the agency said. The baby was
recovering from mild illness, it added.
Style Underperformer:
Sector Underperformers:
- 1) Coal -2.01% 2) Road & Rail -1.52% 3) Computer Services -1.23%
Stocks Falling on Unusual Volume:
- HK, BTE, SU, BP, IBM, AAPL, MBT, AVA, TDC, GNE, GBX, MIND, XXIA, ADT, CALL, UAN, BEAM, NSR, BTE, HCSG, CCL, THC, TRN, CJES, HCA, GWR, SIG, OIS, SU, BWA, NSC, HMIN, AAXJ, CPWR and UCO
Stocks With Unusual Put Option Activity:
- 1) HUN 2) HIG 3) BBY 4) MCD 5) PRU
Stocks With Most Negative News Mentions:
- 1) ARUN 2) XOM 3) ATI 4) LULU 5) KMP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Retail +1.10% 2) REITs +.98% 3) Utilities +.78%
Stocks Rising on Unusual Volume:
- HMC, TM, ALLT, STL, FNSR, JOSB, BBY, PNRA and HUN
Stocks With Unusual Call Option Activity:
- 1) CRK 2) UUP 3) TIVO 4) FIO 5) SLM
Stocks With Most Positive News Mentions:
- 1) PANL 2) FNSR 3) PNC 4) JCI 5) SKT
Charts:
Evening Headlines
Bloomberg:
- North Korea Warns U.S. It’s Authorized Nuclear Attack. North
Korea escalated its threats against the U.S, saying a law ratified this
week authorizes the military to use a “cutting-edge smaller, lighter
and diversified nuclear strike.” Kim Jong Un’s regime, which hasn’t
demonstrated it is capable of putting a nuclear device on a ballistic
missile, didn’t specify what kind of weapon would be used in a statement
by a military spokesman in the state-run Korean Central News Agency
early today. In response to recent North Korean threats, the Pentagon
yesterday said it will deploy a missile defense system to Guam in coming
weeks as a “precautionary move.”
- Asian Stocks Drop With Metals Before BOJ Decision as Won Weakens.
Asian stocks fell to a five-week low and metals declined as the Bank of
Japan (8301) concludes a two-day policy meeting, while Australia’s
dollar rose. South Korean shares and the won dropped as North Korean
tensions escalated. The MSCI Asia Pacific Index lost 0.9 percent at 12:20 p.m. in Tokyo. Japan’s Nikkei 225 Stock Average fell 1.7 percent and
South Korea’s Kospi index slumped 1.6 percent.
- Draghi Considers Plan B as Sentiment Dims After Cyprus Fumble.
European Central Bank President Mario Draghi is under pressure to
reveal Plan B. A botched attempt to rescue Cyprus last month sent bank
shares tumbling across the euro area and rattled confidence in
policy makers’ ability to tame the sovereign debt crisis. With
doubts growing about Draghi’s forecast for a second-half
economic recovery, he’s considering his options. They range from an
interest-rate cut to a new round of
long-term loans to banks, to a plan to encourage lending to
companies, three officials with knowledge of the deliberations
said. They stressed that such action may not be announced today. “They have to start thinking about a plan for
unconventional measures if the recovery does not materialize,”
said Martin van Vliet, senior euro-area economist at ING Bank NV
in Amsterdam. “It may be too early for them to do that this
month, but I’d expect Draghi to acknowledge that the economy is
not improving and the chances of a surprise are bigger than they
were.”
- RBS Rides Euro's Decline as Most Accurate
Forecaster: Currencies. Royal Bank of Scotland Plc was most-accurate
foreign-exchange forecaster in the first quarter after predicting
Europe's bond-buying plan would fail to boost the euro as the region's
economy wilted. The firm sees the 17-nation currency declining 7.4% over
the rest of 2013.
- Hollande Economic Push Threatened by Minister Account Disclosure. President Francois Hollande’s effort
to ask the French to tighten their belts was dealt a blow this
week after the minister he’d charged with fighting tax evasion
admitted to a secret overseas bank account. Jerome Cahuzac, who resigned as Hollande’s budget minister
two weeks ago, said on April 2 that he was caught in a “spiral
of lies” about the 600,000 euros ($770,000) he held in an
offshore account for years. In a rare, unscheduled television
appearance yesterday, Hollande said Cahuzac lied to him and the
French parliament and that his actions were “unforgivable.”
- Fiat Turns to Germany as Italy Sales Seen Worst Since ’66. The bottom was already falling out
of the Italian auto market. Then the political turmoil hit. After an inconclusive election more than five weeks ago
sent weak demand spiraling further downward, sales in 2013 could
drop as much as 21 percent to 1.11 million cars, the lowest
since 1966, said Gian Primo Quagliano, head of automotive researcher CSP
in Bologna. The plummeting deliveries are upending Italy’s auto
industry and will hit Turin-based Fiat SpA (F) especially hard. Hundreds
of dealerships are closing and factories are running at half capacity.
To offset the woe in Italy, which accounts for 56 percent of its
European deliveries, Fiat is seeking to boost sales in Germany by
offering steeper discounts than any other automaker there. Now, even
German demand is weakening: Results released
yesterday showed that, in March, deliveries tumbled 17 percent,
the biggest monthly drop since October 2010, limiting options
for Fiat and other European carmakers to offset declines
elsewhere.
- Schwab(SCHW) Says China to Tighten After Brazil Raises Rates. Faster
inflation will prompt Brazil
to be the first emerging market to raise interest rates before the end
of this year and lead China to also tighten monetary policy, according
to Charles Schwab Corp.’s Michelle Gibley. “Inflation is stubbornly high
in some of the larger countries, Brazil in particular,” Gibley,
director of international research at San Francisco-based Charles Schwab
(SCHW), which has $2.04 trillion in assets, said in a phone interview.
“There’s potential they could be the first to start tightening. In
China, we’re also seeing the central bank somewhat concerned about
inflation. The next move is probably more likely to be tightening than
an easing move.” Brazilian inflation accelerated to 6.31 percent in
February, putting the annual rate above the midpoint of the central
bank’s target for a 30th month. Quickening inflation may spur the central bank to raise the 7.25 percent Selic rate as
early as this year, Gibley said.
- Iron Ore Bear Market Looms as Supply Swamps Demand: Commodities. Iron ore is heading toward its first
surplus in at least a decade as output expands and Chinese steel
mills, the biggest buyers, boost production at the slowest pace
in five years. Seaborne supply will advance 9.1 percent and demand 8.3
percent in 2013, led by exporters from Perth-based Fortescue
Metals Group Ltd. (FMG) to Vale SA (VALE5), Morgan Stanley forecasts. A
surplus will emerge in 2014 and keep widening until at least
2018, the bank predicts. Prices will slump as much as 34 percent
to $90 a ton by the end of December, according to the median of
seven analyst estimates compiled by Bloomberg. Exports of the biggest seaborne cargo after oil are surging
the most since 2010 after prices jumped as much as sevenfold in
the past nine years. Goldman Sachs Group Inc. expects China’s
imports to climb 4 percent in 2013, the least in three years.
Its steel output will expand 2.6 percent as the nation’s economy
grows at the second-slowest pace in the past decade, according
to estimates from Morgan Stanley and economists surveyed by
Bloomberg.
- Copper Declines to Eight-Month Low After U.S. Data Disappoints. Copper slumped for a fifth day to
the lowest level in eight months as worse-than-estimated U.S.
economic data spurred concern that growth is slowing in the
world’s second-biggest user amid increasing stockpiles.
The contract for three-month delivery slid as much as 0.4
percent to $7,356.25 a metric ton on the London Metal Exchange, the lowest price since Aug. 3, and traded at $7,370 by 10:22 a.m. in Tokyo.
- Rubber Slumps to Four-Month Low on Strong Yen, Demand Concerns. Rubber dropped the most in two weeks
as the Japanese currency strengthened to near a one-month high,
cutting the appetite for yen-based commodities. The contract for
delivery in September slumped as much as
3.5 percent to 252.5 yen a kilogram ($2,716 a metric ton), the
lowest since Nov. 19 for a most-active contract on the Tokyo Commodity
Exchange, and was at 252.8 yen at 11:12 a.m. Futures have fallen 16
percent this year and passed the threshold into a bear market on April 1.
- Cohn Says Banks Other Than Goldman, JPMorgan Retrenching. Goldman Sachs Group Inc. and
JPMorgan Chase & Co. are among the only top banks in the world
that aren’t reducing capacity, Goldman Sachs President Gary Cohn
said. “You’re seeing big international banks, outside of
ourselves and JPMorgan, really taking a pretty substantial step
back from the markets, and we hadn’t seen that in the entire
history of banking,” Cohn, 52, told journalists today at
Goldman Sachs’s office in Sao Paulo.
- Lululemon(LULU) Product Chief to Step Down After Pants Recall.
Lululemon Athletica Inc., the yoga- wear maker that last month recalled
shipments of women’s pants for being too sheer, said Chief Product
Officer Sheree Waterson is stepping down. Waterson, who had been with
the company since 2008, will
leave on April 15, the Vancouver-based company said today in a
statement. The company said in a separate release that it was
restructuring its internal product organization.
Wall Street Journal:
- U.S. Dials Back on Korean Show of Force. Administration 'Playbook' Outlined Publicized Exercises, but Officials Change Course Over Worries of North's Response. After a high-visibility display of military power aimed at deterring
North Korean provocations, the White House is dialing back the
aggressive posture amid fears that it could inadvertently trigger an
even deeper crisis, according to U.S. officials. The U.S. is putting
a pause to what several officials described as a step-by-step plan the
Obama administration approved earlier this year, dubbed "the playbook,"
that laid out the sequence and publicity plans for U.S. shows of force
during
annual war games with South Korea. The playbook included
well-publicized flights in recent weeks near North Korea by
nuclear-capable B-52 and stealth B-2 bombers, as well as advanced F-22
warplanes.
- Big Investors Rethink Rosy Outlook on Euro-Zone Debt. Several large institutional investors are starting to question the
European Central Bank's ability to stay true to its pledge last July to
"do whatever it takes" to support the euro zone. With the ECB set to meet Thursday, investors have started to dial
back their positions in euro-zone debt amid concerns that the region's
problems aren't abating. Italy remains in political limbo and its
financial industry is suffering, while Cyprus last month became the
fourth nation in the region to receive a bailout. The ECB's reassurances have muffled fears over a breakup of the euro
zone, but the unresolved issues could eventually require more action
from the central bank. Investors complain the ECB has lagged behind the
Federal Reserve and the Bank of Japan in making economic stimulus moves.
- Doubts Cast on Chinese Exports.
A discrepancy between China's export data and Hong Kong import numbers
is raising doubts about what appeared to be booming overseas demand for
Chinese goods, amid uncertainty about the strength of the recovery in
the world's second-largest economy. Some exporters, trade agents and economists said the export numbers
were likely to be inaccurate because of false reporting by exporters and
local governments. They point in particular to mismatching trade
figures with Hong Kong, the first destination for many mainland Chinese
goods.
In the three months through February,
mainland customs reported $94.9 billion in exports to Hong Kong, but
Hong Kong customs reported only $58.7 billion in imports from the
mainland. The discrepancy during the period was greater than at any
other time in recent years. China's export growth for February could have been overstated by around
seven percentage points, based on an analysis of data discrepancies,
Louis Kuijs, China economist at RBS, estimated.
- Audit says Katrina aid may have been misspent. Federal investigators said Wednesday that as much as $700 million in
federal aid intended to help some 24,000 Louisiana families elevate
their homes after Hurricanes Katrina and Rita in 2005 may have been
misspent. A report by the Housing and Urban Development Department's
inspector
general said some homeowners who got grants of up to $30,000 used the
money for something else, and that others didn't provide sufficient
documents to state officials to show that the work was done. "The state
did not have conclusive evidence" that $698.5 million in
disaster recovery aid was used to elevate homes, the auditors wrote.
- Tip on Policy Shift Jolted Health Shares.
Alerted by a private message about a potential coming change in
government health-care policy, certain investors earlier this week
sparked a frenzy of trading in some of the industry's largest companies.
The last-minute action, which drove
the shares sharply higher before the close of trading, is throwing a
spotlight on the controversial "political intelligence" industry, the
subject of a report due Thursday by the investigative arm of Congress.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Maverick Capital partner Michael Pausic to launch own firm. Maverick Capital's Michael
Pausic, who oversees media and telecommunications investments at
the $9 billion hedge fund, will be starting his own hedge fund,
two people familiar with the matter said.
Pausic, who joined Maverick in 1997, four years after Lee
Ainslie founded the firm in 1993, has wanted to branch out
beyond media and telecommunications for some time and will
receive a significant investment from Maverick's partners to
launch his own firm, one of the two people familiar with the
matter said.
- Compuware(CPWR) estimates fourth quarter results below Street. Business
software maker Compuware Corp estimated fourth-quarter results way
below analysts estimates, citing delays in closing several deals.
The company estimated adjusted earnings of 5 cents to 6 cents per share
on revenue of $237 million to $241 million in the quarter ended Mar. 31.
Analysts on average were expecting adjusted earnings of 15 cents per
share on revenue of $272.8 million, according to Thomson Reuters
I/B/E/S. "A large number of deals we had anticipated closing in Q4
were pushed into the new fiscal year, significantly impacting
our results," Compuware CEO Bob Paul said.
- North Korea again blocks access to industry zone, Southerners remain. North
Korea barred entry to a joint industrial complex it shares with the
South for a second day on Thursday, Seoul's Unification Ministry said,
and demanded extended notice of when hundreds of South Korean workers
planned to leave. The state's KCNA news agency again threatened complete closure of the zone,
a lucrative money-spinner for impoverished Pyongyang, if South Korea
kept up what the agency termed its insults against the North's
government.
Financial Times:
- Fed member hints at summer slowing of QE3. A leading dove at the Federal Reserve said it could start tapering
off its QE3 programme of quantitative easing this summer, in a sign of
how debate at the US central bank has shifted on the issue. John
Williams, president of the San Francisco Fed, led the push for more
asset purchases in the summer of 2012 and his willingness to consider
slowing the rate of buying suggests the central bank is nearing
its goal.
Yomiuri:
- China May Delay Japan, South Korea Meeting on Island Dispute. China asks to postpone meeting scheduled for May 25-26 in Seoul amid territorial dispute over islands known as Senkaku in Japanese, Diaoyu in Chinese.
Asahi:
- North Korea Moving Missile to East Side of Country. Missile may
be capable of reaching continental United States, citing officials in
Japan, US and South Korea. North Korea may be preparing to launch
missile.
Xinhua:
- DPRK announces to resort to counteractions against United States. The Democratic People's Republic of Korea (DPRK) on
Thursday said it would "take powerful practical military counteractions"
against the United States following the latter's provocative actions in
the past days, reported KCNA, the DPRK's official news agency. KCNA on Thursday ran the full text of a statement issued by the
spokesman for DPRK's General Staff of the Korean People's Army ( KPA) in
charge of all operations, which said the KPA Supreme Command had
approved the decision. "Days and months have passed on this land amid the constant danger of
war but never had the whole Korean Peninsula been exposed to such
danger of a nuclear war as today," said the statement, pledging that the
DPRK's army and people "are all out" to defend the sovereignty of DPRK
and to "prevent a nuclear war of the U.S."
Evening Recommendations
Night Trading
- Asian equity indices are -1.5% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 122.0 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 98.5 +1.75 basis points.
- NASDAQ 100 futures +.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 353K versus 357K the prior week.
- Continuing Claims are estimated at 3050K versus 3050K prior.
Upcoming Splits
Other Potential Market Movers
- The ECB's Draghi speaking, Fed's Yellen speaking, Fed's George speaking, Fed's Bernanke speaking, Fed's Evans speaking, Fed's Lockhart speaking, 10Y Spanish auction, Eurozone Services PMI, Eurozone inflation data, ECB rate decision, BoE
rate decision, BoJ rate decision, Challenger Job Cuts for March, RBC
Consumer Outlook Index for April, weekly Bloomberg Consumer Comfort
Index, (FB) mobile event and the weekly EIA natural gas inventory report
could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 78.0 -20.41%
- Total Put/Call 1.03 +19.77%
Credit Investor Angst:
- North American Investment Grade CDS Index 89.23 +1.73%
- European Financial Sector CDS Index 179.28 -3.1%
- Western Europe Sovereign Debt CDS Index 103.86 -.45%
- Emerging Market CDS Index 262.89 -2.17%
- 2-Year Swap Spread 16.0 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -18.0 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .06% -1 bp
- China Import Iron Ore Spot $135.60/Metric Tonne -.37%
- Citi US Economic Surprise Index 8.40 -5.2 points
- 10-Year TIPS Spread 2.49 -3 bps
Overseas Futures:
- Nikkei Futures: Indicating a -130 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
