Broad Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 94.0 -30.37%
- Total Put/Call .88 +3.53%
Credit Investor Angst:
- North American Investment Grade CDS Index 82.07 +.09%
- European Financial Sector CDS Index 158.98 -.29%
- Western Europe Sovereign Debt CDS Index 102.33 unch.
- Emerging Market CDS Index 224.89 -1.55%
- 2-Year Swap Spread 14.0 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -17.25 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .06% -1 bp
- Yield Curve 156.0 -1 basis point
- China Import Iron Ore Spot $140.90/Metric Tonne +.21%
- Citi US Economic Surprise Index 9.0 +1.8 points
- 10-Year TIPS Spread 2.47 +3 bps
Overseas Futures:
- Nikkei Futures: Indicating +29 open in Japan
- DAX Futures: Indicating -21 open in Germany
Portfolio:
- Higher: On gains in my medical/biotech/retail sector longs
- Market Exposure: 75% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -2.07% 2) Computer Hardware -2.01% 3) Steel -1.90%
Stocks Falling on Unusual Volume:
- FTNT, NIHD, MSFT, HFC, LFC, ACHN, CBSH, OZRK, IART, APOG, RTI, MPW, JOY, CBI, MSFT, AMBA, GDOT, HPQ, CLF, VALE and VLO
Stocks With Unusual Put Option Activity:
- 1) CTIC 2) ACAD 3) TXN 4) MSFT 5) JOY
Stocks With Most Negative News Mentions:
- 1) IART 2) ANDE 3) BRCM 4) DELL 5) YUM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Retail +1.78% 2) Hospitals +1.26% 3) Biotech +1.20%
Stocks Rising on Unusual Volume:
- TVL, GTN, TM, ACAD, ZUMZ, PRLB, BKW, SBGI, ROST, OXY, DGX, LTD, FSLR, LRCX, NXST, URI and ONXX
Stocks With Unusual Call Option Activity:
- 1) LRCX 2) RAD 3) A 4) CVC 5) ACAD
Stocks With Most Positive News Mentions:
- 1) TOL 2) GD 3) BA 4) LMT 5) BRCM
Charts:
Evening Headlines
Bloomberg:
- Italy Sells Bonds With Debt Level Approaching Postwar Record. One day after Prime Minister Mario Monti announced Italy’s debt will reach a postwar record this year, the Treasury is tapping investors with the sale of as much
as 7.5 billion euros ($9.8 billion) of bonds. The Rome-based Treasury will offer as much as 4 billion
euros of a new three-year bond, 2 billion euros of 15-year debt
and 1.5 billion euros of floating-rate notes. The auction should
get “strong support” from 16.7 billion euros in redemptions
due April 15 that will leave investors with funds to reinvest,
UniCredit analysts including Chiara Cremonesi wrote in a note
yesterday.
Italy’s bond yields declined yesterday even after the
government announced that its debt will rise to 130.4 percent of
gross domestic product from 127 percent last year as the third-
biggest economy borrows to contribute to bailouts and pay
arrears to government suppliers.
- Merkel’s No-Nuke Stumble May Erode Re-Election Support: Energy. Chancellor Angela Merkel’s sweeping
plan to transform Germany into a green-energy giant almost
destroyed Nordseewerke GmbH, one of the country’s leading makers of wind-turbine foundations. Nordseewerke, which produces Statue of Liberty-sized
foundations, ramped up its manufacturing capacity and head count
in 2011 after Merkel declared that Germany would begin a massive
project to install 25,000 megawatts of offshore wind power by
2030.
- Hagel Calls on North Korea to Tone Down Rhetoric. U.S. Defense Secretary Chuck Hagel said North Korea has “been skating
very close to a dangerous line” and should tone down its “bellicose
rhetoric” to ease mounting tensions in the region. “Their actions and their words have not helped defuse a combustible
situation,” Hagel said yesterday at a Pentagon news conference. He said
the U.S. is “fully prepared to deal with any contingency.”
- Australia’s Unemployment Rate Jumps to Three-Year High: Economy. Australia’s unemployment rate climbed in March to the highest level in more than three years,
sending the local dollar and bond yields lower as traders added
to bets the central bank will resume interest rate cuts.
The jobless rate rose to 5.6 percent from 5.4 percent, the
statistics bureau said in Sydney today, the highest since
November 2009.
- Bank of Korea Resists Rate-Cut Pressure as North Threatens War.
The Bank of Korea held borrowing costs unchanged for a sixth month,
resisting pressure from the government for a reduction even as North
Korean threats of war threaten to undermine confidence. Governor Kim
Choong Soo and his board kept the benchmark seven-day repurchase rate at
2.75 percent, the central bank said in a statement in Seoul today. Nine of 20 economists surveyed by Bloomberg News predicted the move while the remainder forecast a
25-basis-point cut.
- Fed’s Fisher Says Benefits and Costs of Asset Purchases Unclear. Federal
Reserve Bank of Dallas
President Richard Fisher said that both the ultimate benefits and costs
of the central bank’s asset purchases are unclear. “Companies are
starting to use the copious cheap money they have access to for
investing in capital projects and employing increasing amounts of
workers,” Fisher said in the text of prepared remarks given today in El
Paso, Texas. “But it is not yet clear that we will achieve a justifiable bang for the trillions of bucks the Fed has flooded the economy with.” “The
Federal Reserve has provided plenty of, if not too much, high-octane
fuel in the form of cheap and abundant money to propel the economy
forward,” Fisher said at the University of Texas at El Paso.
- Microsoft(MSFT) Windows Weak Demand Drives Worst PC Drop on Record. Personal-computer
shipments plummeted in every region of the world in the first quarter
as buyers opted for smartphones and tablet computers and Microsoft Corp.
(MSFT)’s newest operating system met with weak demand. Global PC
unit shipments fell 14 percent in the first quarter -- the worst such
decline on record -- to 76.3 million, a bigger drop than the 7.7 percent
decline IDC had forecast, the market researcher said in a statement. The slump was the steepest since IDC began tracking shipments in 1994.
Every PC maker except China’s Lenovo Group Ltd. (992) experienced
declines as businesses chose to install Microsoft’s Windows 7 operating
system on employees’ computers instead of the newer Windows 8, Jay Chou,
an analyst at Framingham, Massachusetts- based IDC, said in an
interview. Consumers also shunned Windows 8 in favor of smartphones and
tablets, which can handle many of
the same tasks, he said. “We don’t have a lot of reason to be optimistic
that the
market will remain in more than replacement-cycle mode,” Chou
said. Consumers have found Windows 8’s redesigned user interface
disorienting, and prices for touch-screen enabled computers that
run the software are still too high, he said. The last time worldwide PC shipments experienced a double-
digit percentage decline was in the third quarter of 2001, when
the market was roiled by the Sept. 11 terrorist attacks and the
impact of a decline in technology stocks, Chou said.
- Goldman Sachs(GS), Citigroup(C), Carlyle Received Fed Minutes Early. Banks
including Citigroup Inc. and Goldman Sachs Group Inc., along with
congressional staff members and trade groups, received potentially
market-moving Federal Reserve information 19 hours before the public in a
release the central bank called accidental. Brian Gross, a member
of the Fed’s congressional liaison staff, distributed the March 19-20
minutes of the Federal Open Market Committee meeting at 2 p.m. yesterday
Washington time, according to an e-mail obtained by Bloomberg News.
Gross referred questions to Fed spokeswoman Michelle Smith.
- Iron Ore’s $250 Billion Glut Pressures Rio to Vale: Commodities. The
world’s biggest iron-ore producers are planning $250 billion of new
mines, threatening to deepen a price slump for the commodity already
forecast to drop for at least the next three years. Mining companies
are facing growing investor pressure to defer or cancel projects to
stem price declines. Rio Tinto Group (RIO), the second-largest iron ore
exporter, will decide on one of the biggest industry expansions in
Western Australia in the
second half. A decision to delay would boost its earnings in
2015 by $3.7 billion, according to Liberum Capital Ltd.
Wall Street Journal:
Fox News:
- Obama budget proposes more than $1 trillion in taxes, fees. President Obama's budget proposal includes new tax increases that hit
everything from deductions for top earners to packs of cigarettes. Though the president's newly released plan claims to include $580
billion in new revenue over the next decade, when all taxes and fees are
counted the real number is slightly higher than $1 trillion.
- N. Korea positions missile launchers on coast, Hagel says regime close to 'dangerous line'. North Korea has positioned two mobile missile launchers on the
country's east coast, senior Pentagon officials tell Fox News --
movement that comes as Defense Secretary Chuck Hagel warned Wednesday
that North Korea is "skating very close to a dangerous line." The senior Pentagon officials told Fox News that a test of the
Musudan missiles could occur "at any time." If the North Koreans
proceed, it would be the first mobile test of this specific
intermediate-range missile, which has a range of 2,500 miles. The fact that this would be their first test is giving military
leaders an added layer of uncertainty about the potential for an
unintended mistake.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Yum(YUM) says bird flu hits China April sales; March down. KFC parent Yum Brands Inc
warned that a new bird flu outbreak in China badly hit
restaurant sales there this month, even as the company also
reported a sharper-than-expected slide in March sales in the
country caused by the lingering impact of a separate food safety
scare. "Within the past week, publicity associated with Avian flu
in China has had a significant, negative impact on KFC sales,"
the company said in a regulatory filing on Wednesday.
Telegraph:
- Christine Lagarde: crisis has created 'three-speed economy'. The global financial crisis has created a "three-speed economy" with
the eurozone at the bottom and a too-big-to-fail banking model that is "more
dangerous than ever", the managing director of the International Monetary
Fund has said.
Kyodo:
- Japan stays alert for potentially more than one missile launch by North Korean, citing Defense Minister Itsunori Onodera.
South China Morning Post:
- Chinese North Korea Scholar Says 70%-80% Chance of War. Zhang Liangui, professor of intl. strategic research at the Chinese Communist Party's Central Party School, says North Korean leader Kim Jong Un may want to use crisis as an opportunity to force reunification of Korean Peninsula.
China Securities Journal:
- China
Small Firms "Not Optimistic" on Economy. Chinese small and medium-sized
companies are "not optimistic" about the economy this year because of
weak domestic and overseas demand, China Securities Journal reports after a tour in Shandong
and Zhejiang provinces and Shenzhen city. Coal and cotton stockpiles
in Qingdao's bonded zone remain high. Some small companies report
falling profit because of rising labor, land leasing and other operating
costs, the report said.
- China's southern city of Guangzhou will raise the minimum down payment requirement for second home purchases to 70% if its home prices rise by more than 2% in April on month, citing a person familiar with the matter.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 116.0 -.75 basis point.
- Asia Pacific Sovereign CDS Index 92.5 -1.75 basis points.
- NASDAQ 100 futures -.20%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Import Price Index for March is estimated to fall -.5% versus a +1.1% gain in February.
- Initial Jobless Claims are estimated to fall to 360K versus 385K the prior week.
- Continuing Claims are estimated to rise to 3067K versus 3063K.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Plosser speaking, Fed's Bullard speaking, Italian 10Y bond
auction, German CPI, Australia Unemployment data, 30Y T-Bond auction,
weekly Bloomberg Consumer Comfort Index and the (NVDA) investor day
could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and technology shares in the region. I expect US stocks to open modestly lower and rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 156.0 +32.30%
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.
- 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
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.
