Wednesday, April 10, 2013

Stocks Surging into Final Hour on Central Bank Stimulus Hopes, Less Eurozone Debt Angst, Short-Covering, Tech/Biotech Sector Strength

Broad Market Tone:
  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • VIX 12.66 -1.40%
  • ISE Sentiment Index 156.0 +32.30%
  • Total Put/Call .84 -1.3%
  • NYSE Arms 1.16 +50.56%
Credit Investor Angst:
  • North American Investment Grade CDS Index 82.15 -2.92%
  • European Financial Sector CDS Index 159.45 -5.43%
  • Western Europe Sovereign Debt CDS Index 102.33 unch.
  • Emerging Market CDS Index 228.44 -3.33%
  • 2-Year Swap Spread 14.5 unch.
  • TED Spread 21.0 -.75 bp
  • 3-Month EUR/USD Cross-Currency Basis Swap -16.75 -.5 bp
Economic Gauges:
  • 3-Month T-Bill Yield .07% +1 bp
  • Yield Curve 157.0 +6 basis points
  • China Import Iron Ore Spot $140.60/Metric Tonne +1.08%
  • Citi US Economic Surprise Index 7.20 +2.7 points
  • 10-Year TIPS Spread 2.44 -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +312 open in Japan
  • DAX Futures: Indicating +15 open in Germany
Portfolio: 
  • Higher: On gains in my tech/medical/biotech/medical/retail sector longs
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 75% Net Long

Today's Headlines

Bloomberg:
  • Italy’s Debt to Rise to Record in 2013 as Recession Lingers. Italy’s debt will reach a postwar record this year as the recession-hit country borrows to contribute to bailouts and pay arrears to suppliers. The public debt will rise to 130.4 percent of gross domestic product in 2013 from 127 percent last year, Prime Minister Mario Monti’s office said in a statement after his Cabinet reviewed its budget plan. The budget deficit will drop to 2.9 percent of GDP this year, putting Italy within the European Union’s 3 percent limit. “Many are suggesting we change strategy in the management of public finance,” Monti said at a press conference in Rome. “Discipline in public finances needs to be maintained in the years to come. Only if Italy stays out of the procedure for excessive deficit will it be able undertake actions needed for the country, like the recent payment of public administration debts.”
  • Slovenia, Spain Warned of Excessive Economy Imbalances by EU. The European Commission warned of “excessive” risks to the economic health of Slovenia and Spain, calling on both governments to take urgent action to stem the spread of the euro crisis. Slovenian banks are likely to need fresh capital injections as over-indebted corporate borrowers struggle to pay back loans amid a double-dip recession, the Brussels-based commission said. It said Spain is encumbered by public and private debt. 
  • European Stocks Rally Most in Month as Bank Shares Rise. European stocks gained the most in a month, with the Stoxx Europe 600 Index posting its longest winning streak since January, as banks advanced and a report showed Chinese imports beat forecasts in March. BNP Paribas SA, Frances’s largest lender, and Banco Santander SA, Spain’s biggest, led a gauge of European banking shares to their largest advance in almost five months. SMA Solar Technology AG (S92), Germany’s biggest solar-energy company, and Wacker Chemie AG (WCH) added at least 5.8 percent. Gerresheimer AG rose 2.5 percent after reporting first-quarter revenue that beat analysts’ projections.
  • Kuroda Says BOJ Has Taken All Possible Monetary Actions for Now. Haruhiko Kuroda said the unprecedented stimulus announced by the Bank of Japan (8301) at his first meeting as governor last week is enough to achieve a 2 percent inflation goal. The central bank has taken all “necessary” and “possible” measures, Kuroda told reporters in Tokyo yesterday. While officials will change policy as needed, he doesn’t expect adjustments each month, he said. The BOJ chief reiterated a pledge to do what’s needed to meet the target in two years. 
  • FOMC Minutes: Several Members Saw QE Ending by Year-End. Several Federal Reserve (FDTR) officials said the central bank should begin tapering its quantitative easing program later this year and stop it by year end, minutes of their March meeting showed. The Federal Open Market Committee members “thought that if the outlook for labor market conditions improved as anticipated, it would probably be appropriate to slow purchases later in the year and to stop them by year-end,” according to the record of the March 19-20 FOMC meeting released today in Washington ahead of the regularly scheduled 2 p.m. time.
  • OPEC Trims Oil Demand Growth Forecast; March Output Drops. OPEC trimmed its estimate for global oil demand growth after the group’s crude production dropped last month. Worldwide oil consumption will rise this year by 800,000 barrels a day, or 0.9 percent, revised down from 840,000 last month, the Organization of Petroleum Exporting Countries said in its Monthly Oil Market Report today. Demand will rise to 89.66 million barrels a day in 2013 versus 88.87 million last year, OPEC estimated. The group’s output fell in March as Nigeria, Iran and Kuwait pumped less.
  • Goldman(GS) Cuts Gold Price Forecast as Cycle Turns. The turn in the gold price cycle is accelerating after a 12-year rally as the recovery in the U.S. economy gains momentum, according to Goldman Sachs Group Inc., which reduced forecasts for the metal through 2014. The bank cut its three-month target to $1,530 an ounce from $1,615 and lowered the six- and 12-month predictions to $1,490 and $1,390 from $1,600 and $1,550. Goldman recommended closing a long Comex gold position initiated on Oct. 11, 2010 for a potential gain of $219 an ounce, analysts Damien Courvalin and Jeffrey Currie wrote in a report today. 
  • Obama Doubles Estimate to $4 Billion for Health Exchanges. The state health exchanges that are central to the U.S. Affordable Care Act are costing the federal government more than twice its initial budget to complete. The Obama administration expects to have spent $4.4 billion in fiscal 2012 and 2013 on grants to states that are building new marketplaces to sell subsidized health insurance, according to budget proposals released today for 2014. A year ago, the administration had anticipated spending about $2 billion.
 Fox News:
CNBC: 
Zero Hedge:
Business Insider: 
Reuters:
Telegraph:
Handelsblatt:
  • European banks face EU1.2t long-term funding gap as regulators implement stricter liquidity rules, citing a study by consultants McKinsey & Co. McKinsey says many banks can't fulfill requirements as they can't increase deposits quickly enough and demand for unsecured debt has fallen.

Bear Radar

Style Underperformer:
  • Small-Cap Value +.16%
Sector Underperformers:
  • 1) Gold & Silver -3.17% 2) Hospitals -2.66% 3) Homebuilders -.47%
Stocks Falling on Unusual Volume:
  • HMA, ANV, ABX, BRLI, PWE, TITN, RLGY, MSM, GRA, FSLR, INFI, CYH, FAST, THC, HCA, WMC, SLW and SPWR
Stocks With Unusual Put Option Activity:
  • 1) ADT 2) KERX 3) LIFE 4) GIS 5) FSLR
Stocks With Most Negative News Mentions:
  • 1) CCL 2) THC 3) ARO 4) CYH 5) PNC
Charts:

Bull Radar

Style Outperformer:
  • Small-Cap Growth +1.68%
Sector Outperformers:
  • 1) Networking +3.6% 2) I-Banking +2.31% 3) Biotech +2.14%
Stocks Rising on Unusual Volume:
  • SBGI, CS, IBN, SM, NJ, ADTN, CIEN, JDSU, DB, BEAV, FNSR, RKUS, MU, ONXX, JNPR, BAH, SBRA, PMTC, TMO, EXAS and SCTY
Stocks With Unusual Call Option Activity:
  • 1) JDSU 2) EXAS 3) HCA 4) TMO 5) PFE
Stocks With Most Positive News Mentions:
  • 1) NOC 2) AEO 3) MHP 4) QCOM 5) BA
Charts:

Wednesday Watch

Evening Headlines 
Bloomberg: 
  • EFSF Sells 8 Billion Euros of Bonds on Strong Demand in Asia. The European Financial Stability Facility issued 8 billion euros ($10.5 billion) of bonds amid strong investor demand in Asia, helping boost the euro to its highest levels in more than three weeks. The European rescue fund sold 0.875 percent, five-year securities yesterday, according to data compiled by Bloomberg. Investors in Asia made up 29 percent of the buyer base, up from 5 percent on EFSF’s 4 billion euros of March 2016 bonds issued in February, according to a person familiar with the transaction, who asked not to be identified citing lack of authorization to speak publicly.
  • Cyprus Can Save Itself by Fleeing the Euro. 
  • BHP(BHP) CFO Says China Growth May Slow Toward 6% After Two Years. BHP Billiton Ltd. (BHP), the world’s biggest mining company, expects annual economic growth in China to moderate toward 6 percent, saying prospects in its largest customer present its main business risk.
  • China Export Gains Miss Forecasts for First Time in Four Months. China’s exports rose less than forecast for the first time in four months, leaving the world’s second-largest economy with weaker global demand to support a recovery than previous figures indicated. Shipments abroad increased 10 percent from a year earlier, the customs administration said today in Beijing. That compares with 21.8 percent growth in February and the 11.7 percent median estimate in a Bloomberg News survey of 36 economists. Imports rose by an above-forecast 14.1 percent in March, leaving an unexpected trade deficit of $880 million.
  • Bird Flu Outbreak Tied to Viruses That Hit Humans Hard. China’s deadly avian flu outbreak is being driven by at least two closely-related viruses, a situation that may make it more difficult to contain in humans and birds, researchers said. The H7N9 flu has shown signs of genetic diversity since the first three patients were diagnosed, said Richard Webby, director of a World Health Organization collaborating center for the virus at St. Jude Children’s Research Hospital in Memphis. It already appears more infectious than the H5N1 strain of bird flu that has been circulating since 2003, infecting 600 people and killing 60 percent of them, he said. Scientists from around the world are working together to understand the virus because of the potential devastation caused by novel infections. The pandemics of the past century include the 1918 Spanish flu that killed as many as 50 million people and the 2003 SARS outbreak that killed 774. 
  • Chinese Stocks Fall After March Trade Data; Drugmakers Drop. China’s stocks fell for the fifth time in six days, dragged down by health-care companies, after exports rose less than forecast.
    Shijiazhuang Yiling Pharmaceutical Co., whose products are included in a government list of drugs to combat bird flu, tumbled 6.8 percent as a measure of drugmakers dropped the most among industry groups.
  • Bill Gross Raises Holdings of Treasuries to Highest Since July. Bill Gross raised the holdings of Treasuries held in his $289 billion flagship fund at Pacific Investment Management Co. to 33 percent of assets last month, the highest level since July. Gross boosted the proportion of U.S. government securities in Pimco’s Total Return Fund from 28 percent in February, according to a report on the company’s website. Gross has been advising investors to buy government debt, including inflation- linked securities and nominal Treasuries as the Bank of Japan (8301) last week became the latest central bank to announce unprecedented stimulus measures.
Wall Street Journal: 
  • Lenders Used Aid to Repay TARP. A number of small banks used $2.1 billion in government cash intended to boost small-business lending to repay bailout funds from the financial crisis, a government watchdog said Tuesday in a report that also concluded the banks lent less money than firms that didn't take bailout aid. Among the 332 banks participating in a small-business lending program run by the U.S. Treasury, 137 used more than half of about $4 billion disbursed by the program to help fund their exits from the Troubled Asset Relief Program, according to a new report by the special inspector general for TARP. The TARP program was set up to bail out financial firms during the 2008 crisis.
Zero Hedge: 
Business Insider: 
ABC News:
  • Insolvent Union Pension Plans May Double By 2017. A new government report warned that the number of insolvent multiemployer private-sector pension plans could more than double by 2017. The report, issued by the Government Accountability Office, included the survey results of 107 multiemployer plans, 25 percent of which were delaying eventual insolvency. Under the Employee Retirement Income Security Act of 1974, the benefits of multiemployer plans are insured by the Pension Benefit Guaranty Corp., a U.S. government agency that works to protect private-sector defined benefit pension plans. There are about 1,500 multiemployer plans covering more than 10 million workers and retirees, the GAO said.
Telegraph:
  • George Soros repeats call for Germany to leave euro. George Soros, the billionaire investor, has urged Germany to reverse its position on eurobonds or consider leaving the single currency, as he suggested that the euro's prospects would be improved if its most powerful member were to quit.
Nikkei:
  • Japan to Maintain Economic Assessment in April. Japanese government plans to keep its monthly economic assessment for the first time in four months. Japan raised economic assessment in March for the third month.
China Securities Journal: 
  • China Risks Collapse on Outflow, Yu Yongding Says. Unexpected outflows without capital account control will lead to massive capital flights, currency depreciation, inflation, asset-bubble bursts, bankruptcy, debt default and finally the collapse of China's financial system, Yu Yongding, a former academic adviser to the People's Bank of China, wrote in a commentary.
Evening Recommendations 
Piper Jaffray:
  • Raised (AEO) to Overweight, target $24.
Night Trading
  • Asian equity indices are -.50% to +.50% on average.
  • Asia Ex-Japan Investment Grade CDS Index 116.75 -1.25 basis points.
  • Asia Pacific Sovereign CDS Index 94.25 -2.25 basis points.
  • FTSE-100 futures -.02%.
  • S&P 500 futures -.08%.
  • NASDAQ 100 futures -.02%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (STZ)/.45
  • (FDO)/1.22
  • (FAST)/.37
  • (KMX)/.45
  • (BBBY)/1.68
  • (RT)/.10
  • (ADTN)/.10
  • (PGR)/.44 
Economic Releases
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +2,707,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,500,000 barrels versus a -572,000 barrel decline the prior week. Distillate inventories are estimated to fall by -1,500,000 barrels versus a -2,266,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.2% versus a +.6% gain the prior week.
2:00 pm EST
  • The Monthly Budget Deficit for March is estimated at -$107.0B versus -$198.2B in February.
  • FOMC Minutes from March 19/20 Meeting
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Fisher speaking, Fed's Kocherlakota speaking, Fed's Lockhart speaking, Eurozone industrial production data, China Trade data, White House budget release, 10Y T-Note auction, weekly MBA mortgage applications report, USDA report, Bloomberg April Economic Survey, (AAP) investor day and the (IHS) investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker 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 50% net long heading into the day.

Tuesday, April 09, 2013

Stocks Rising into Final Hour on Central Bank Stimulus Hopes, Euro Bounce, Short-Covering, Commodity/Tech Sector Strength

Today's Market Take:

Broad Market Tone:
  • Advance/Decline Line: About Even
  • Sector Performance: Most Sectors Rising
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 12.98 -1.59%
  • ISE Sentiment Index 133.0 +11.76%
  • Total Put/Call .86 -5.49%
  • NYSE Arms .79 +27.62%
Credit Investor Angst:
  • North American Investment Grade CDS Index 84.74 -.88%
  • European Financial Sector CDS Index 168.60 +.30%
  • Western Europe Sovereign Debt CDS Index 102.33 -.98%
  • Emerging Market CDS Index 236.85 -1.47%
  • 2-Year Swap Spread 14.5 -.25 bp
  • TED Spread 21.75 unch.
  • 3-Month EUR/USD Cross-Currency Basis Swap -16.25 +.75 bp
Economic Gauges:
  • 3-Month T-Bill Yield .06% unch.
  • Yield Curve 151.0 unch.
  • China Import Iron Ore Spot $139.10/Metric Tonne +1.09%
  • Citi US Economic Surprise Index 4.50 +1.6 points
  • 10-Year TIPS Spread 2.45 -1 bp
Overseas Futures:
  • Nikkei Futures: Indicating +182 open in Japan
  • DAX Futures: Indicating +32 open in Germany
Portfolio: 
  • Higher: On gains in my tech/medical/biotech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 50% Net Long