Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.06% 2) Coal -1.74% 3) Construction -.33%
Stocks Falling on Unusual Volume:
- EGO, SBNY, CNI, STO, RCI, NGD, PWE, VIAB, IDXX, MOLXA, IIVI, R, EAT, TCK, IRWD, ROLL, GCI, RCI, WRLD, USTR, APD, IR, EGOV, GASS, CIT, ASR, CYT, ELS, CTSH and RCII
Stocks With Unusual Put Option Activity:
- 1) LGF 2) INFA 3) EQIX 4) PAY 5) AKS
Stocks With Most Negative News Mentions:
- 1) YUM 2) CHKP 3) T 4) JBLU 5) CMP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +4.6% 2) Disk Drives +2.98% 3) Airlines +2.84%
Stocks Rising on Unusual Volume:
- GTN,
TSO, BBVA, ILMN, WAT, VECO, COH, NFLX, LXK, TOL, CZR, ARMH, MET, ACTG,
LEN, PNR, INFA, SANM, PAY, DAL, FIO, PHM, SWFT and PKG
Stocks With Unusual Call Option Activity:
- 1) AVP 2) SPLS 3) ALL 4) MET 5) NWS
Stocks With Most Positive News Mentions:
- 1) MET 2) WWD 3) PHM 4) LMT 5) PG
Charts:
Evening Headlines
Bloomberg:
- Derivatives Bludgeoned by Debt Crisis Making Return: Euro Credit.
Investors are reviving credit derivatives trades they used to boost
returns before the financial crisis as unprecedented central bank
liquidity drives down yields and default rates. Investors accumulated 47
contracts insuring a net $461.6 million of debt on so-called tranches
of the current series of the Markit iTraxx Europe Index of
credit-default swaps since trading started April 3, according to the
Depository Trust & Clearing Corp. Tranche trading allows investors
to make concentrated bets on a pool of companies with varying risks and
returns. The strategy was widely used by investors before the U.S.
housing crash and contributed to a $6.2 billion loss at JPMorgan Chase
& Co. after wrong-way wagers by dealers including Bruno Iksil,
nicknamed the London Whale. Trades are now being buoyed by the European
Central Bank’s pledge last year to protect debt markets. “The ECB backstop along with high liquidity provided by central banks globally should promote risk taking and entice
market participants to search for yield through standardized
tranche products,”said Ioannis Angelakis, a credit derivatives
strategist at Bank of America Merrill Lynch in London. “It’s
encouraging seeing traction from the very first couple of
weeks.”
- Napolitano Opens New Round of Italian Government Formation Talks. Italian President Giorgio
Napolitano, strengthened by his re-appointment yesterday, is
starting a new round of consultations aimed at forging consensus
for a new government. “We can no longer, in any way, shirk the
responsibility of
proposing practical solutions and timely decisions for reforms
that are immediately needed for the survival and progress of Italian
democracy and society,” Napolitano, 87, said in a speech to Parliament
in Rome after his swearing in.
- Michelin Quarterly Sales Drop as Europe Recession Widens. Michelin
& Cie. (ML), Europe’s largest tiremaker, said first-quarter revenue
fell 8.1 percent as a recession reducing car sales in its home region
widened to hurt demand at bulldozer and military-plane manufacturers.
Sales dropped to 4.88 billion euros ($6.36 billion) from 5.3 billion
euros a year earlier, Clermont-Ferrand, France-based Michelin said
yesterday in a statement. Revenue missed the 4.97 billion-euro average
of four analyst estimates compiled by Bloomberg. The tiremaker,
reiterating forecasts of “steady” volume and “stable” earnings for 2013,
said it may look at reorganizing in the absence of a market recovery. Demand for earthmovers is “falling sharply” in Europe and North America, and sales of farm tractors and defense aircraft
are also declining, Michelin said. “If volumes stay at the levels at which they are today,
that would imply some European restructuring,” Chief Financial
Officer Marc Henry said on a conference call with analysts.
“This is under scrutiny of course, but nothing is said yet.”
- Chinese Stocks Slump Most in Three Weeks as Manufacturing Slows. China’s
stocks fell, dragging the benchmark index down the most in three weeks,
as a gauge of manufacturing in the nation this month trailed estimates.
Anhui Conch Cement Co. slid 6.5 percent and Sany Heavy Industry Co.
lost 3.2 percent, pacing declines by construction- related companies.
China Minsheng Banking Corp. slumped 3.9 percent as financial companies
retreated. The preliminary reading of a Purchasing Managers’ Index fell
to 50.5 from 51.6 in March, according to HSBC Holdings Plc and Markit
Economics. That compared with the 51.5 median forecast of economists. The Shanghai Composite Index (SHCOMP) declined 2.1 percent
to 2,194.12 at the 11:30 a.m. local-time break, heading for its biggest
loss since March 28. The CSI 300 Index (SHSZ300) fell 2.8 percent to
2,459.33. The Hang Seng China Enterprises Index (HSCEI) retreated 1.8 percent in Hong Kong, taking this year’s drop to 9.1 percent.
- Japan Lawmakers Visit War Shrine After China, S. Korea Protest. A group of 168 Japanese lawmakers
visited a shrine seen in Asia as a symbol of the country’s
wartime aggression, a day after a similar visit by Finance
Minister Taro Aso drew complaints from South Korea and China. The
cross-party group made the visit today to coincide with the spring
festival at Yasukuni Shrine, Kyodo news agency said, citing an
announcement by the lawmakers. The shrine commemorates Japan’s war dead,
including World War II leaders convicted by an
international tribunal of war crimes.
- Fraga Says He’s Disturbed by Brazil’s Focus on Consumption. Arminio Fraga, Brazil’s former
central bank president, is concerned by the government’s push to
foster growth by encouraging consumers to spend more on credit. The speed of loan growth in Brazil merits “some
monitoring,” Fraga, founder of Gavea Investimentos Ltda., said
in remarks at an event organized by the Brazilian-American
Chamber of Commerce in New York. Brazil is using state-owned
banks aggressively to promote its goals, said Fraga, who was
president of Brazil’s central bank from 1999 to 2002. “The excessive emphasis on consumption disturbs me,”
Fraga, 55, said. “You’re borrowing a lot now, but time will
come that people will have to pay. You need to do some things on
the fiscal and monetary front and also pay attention, with a
prudential mindset, keeping an eye on what these loan portfolios
look like.”
- Rebar Falls for Second Day on Supply Concern, China Flash PMI.
Steel reinforcement-bar futures
fell for a second day amid concerns that production is too high at local
mills and after a preliminary reading of China’s manufacturing in April
trailed estimates. The contract for October delivery on the Shanghai Futures
Exchange declined by as much as 1.2 percent to 3,605 yuan ($584),
before trading at 3,625 at 10:42 a.m. local time. Futures lost 4
percent last week, the biggest weekly decline since Feb. 22.
- STMicro(STM) Sales Forecast Trails Estimates as Wireless Losses Mount. STMicroelectronics
NV (STM), Intel Corp. (INTC)’s biggest competitor in Europe, forecast
revenue that fell short of analysts’ estimates after demand in the
wireless
business failed to improve in the first quarter.
Second-quarter sales will grow by 3 percent from the
previous period, plus or minus 3.5 percentage points, Europe’s
biggest chipmaker said yesterday.
Wall Street Journal:
- Fresh Bomb Details Revealed. Prosecutors Describe Suspect's 'Calm' Behavior; Charges Could Carry Death Penalty. Dzhokhar Tsarnaev coolly dropped off a homemade bomb in the crowd at the
Boston Marathon and then walked away amid the confusion as another
explosive set by his brother detonated nearby, federal authorities
alleged Monday in charging the teen with a terrorist act that could
carry the death penalty.
- Flight Delays as Political Strategy. The FAA furloughs traffic controllers rather than cut other spending. President Obama's sequester scare strategy has been a political flop,
but his government keeps trying. The latest gambit is to force airline
flight delays until enough travellers stuck on tarmacs browbeat enough
Republicans to raise taxes again. This week the Federal Aviation Administration (FAA) began furloughing
each of its air-traffic controllers for one day out of every 10 to
achieve roughly $600 million in savings this fiscal year. The White
House dubiously claims that the furloughs are required by the sequester
spending cuts enacted in 2011. Capitol Hill Republicans say the White House is free to make other
cuts instead. House Transportation and Infrastructure Chairman Bill
Shuster suggests the FAA first take a whack at the $500 million it's
spending on consultants, or perhaps the $325 million it blows on
supplies and travel.
CNBC:
- China April HSBC Flash PMI Eases, Points to Tepid Recovery. Growth in China's vast factory sector dipped in April as new export
orders shrank, a preliminary survey of factory managers showed on
Tuesday, suggesting the world's second-largest still faces formidable
global headwinds into the second quarter. The flash HSBC
Purchasing Managers' Index for April fell to 50.5 from 51.6 in March but
was still stronger than February's reading of 50.4. A sub-index
measuring new export orders fell to 48.6 in April from 50.5 in March,
reflecting weaker global demand as the U.S. economic recovery remains
fragile and the euro zone is mired in recession.
- A New Tax Could Send Shoppers Back to the Mall. Your Internet shopping addiction could soon face a new tax. The Senate appears ready to ease the restrictions on how states can
charge sales tax. Under current federal law, online retailers only
collect the tax when they have a physical presence—a store, warehouse or
office—inside your state. In a new bill expected on Monday to clear a
procedural Senate vote, all online sales would be subject to state sales
taxes.
- Netflix(NFLX) Shares Soar After Earnings Beat.
Netflix delivered earnings that topped expectations, added more online
subscribers and introduced a service that will allow users to stream
four movies at the same time. Netflix shares shot up more than 25
percent after the report.
Zero Hedge:
Business Insider:
AFP:
- 8 Chinese ships in Japan waters near disputed isles. Eight Chinese government ships entered Japanese territorial waters
near disputed islands on Tuesday, the most in a single day since Tokyo
nationalised part of the archipelago, the Japanese government said. Japan's
coastguard confirmed the vessels had entered waters near the East China
Sea island chain, while the government's top spokesman said the
flotilla was a one-day record since Tokyo's nationalisation in
September.
Reuters:
- U.S. takes $21 mln from Fisker as automaker misses payment. The U.S. Department of Energy took $21
million from cash-strapped Fisker Automotive on April 11 that
will go toward repaying nearly $200 million in loans extended to
the automaker under a U.S. program to spur advanced vehicle
development. "The department recouped the company's approximately $21
million reserve account -- funds that came from the company's
sales and investors, not our loan- and will apply those funds to
the loan," DOE spokeswoman Aoife McCarthy said on Monday.
- McDonald's(MCD) fined in Brazil for pushing Happy Meals to children. A
consumer protection agency in Brazil has taken aim at the Happy Meal,
fining McDonald's Corp on Monday for targeting children with its
advertising and toys. The Procon agency in the state of Sao Paulo fined the
fast-food company 3.2 million reais ($1.6 million), adding fuel
to a global debate about fast food and public health.
- Brazil's sluggish economy starts to weigh on ecommerce. Brazilian
ecommerce
executives used to laugh when asked about the stagnation of
Latin America's biggest economy. Not anymore. With inflation eroding
consumption in this nation of 194 million people, the economy is casting
a shadow over a once-hyped market that recently attracted Amazon,
Facebook, Twitter and Netflix.
Financial Times:
- EU warns US on bank ‘protectionism’. US plans to force foreign banks to hold more capital are a threat to harmonious global regulation and risk “a protectionist
reaction”, the EU commissioner in charge of financial services has
warned. Michel Barnier told Ben Bernanke, Federal Reserve chairman, that
plans to force higher capital requirements on the US subsidiaries of
European banks could lead to retaliation against US banks.
- CFTC’s Gensler says Libor ‘unsustainable’. Libor
borrowing rates must be replaced soon as possible as it was
“unsustainable” to continue to use them, the top US regulator overseeing
a global effort to reform the benchmarks for global financial markets
has urged.
Telegraph:
The Guardian:
Yonhap News Agency:
- Parcel with powder sent to S. Korean defense minister. A parcel containing a threatening letter and suspicious powder was
delivered to South Korean Defense Minister Kim Kwan-jin on Tuesday,
ministry officials said, days after hundreds of leaflets threatening him
were found amid high tensions with North Korea. "In the parcel
addressed to defense minister with no sender name, the ministry found a
threatening letter and unidentified powder," the ministry said in a
release. The ministry identified the parcel delivery as "an
attempted terror" against the minister and formed an emergency team to
analyze components of the white powder and trace the sender. The letter was the same leaflet, which were distributed near the
ministry in early Friday morning, officials said. It denounced Kim's
hard-line stance on North Korea and threatened to "punish" him.
China Business News:
- China's
local government financing vehicles will have to repay 3.49t yuan of
loans over the next 3 years, citing Shang Fulin, Chairman of the China
Banking Regulatory Commission.
Evening Recommendations
Night Trading
- Asian equity indices are . to +% on average.
- Asia Ex-Japan Investment Grade CDS Index 112.50 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 90.0 -.25 basis point.
- NASDAQ 100 futures -.16%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:58 am EST
- The Preliminary Markit US PMI for April is estimated at 53.9.
9:00 am EST
- The House Price Index for February is estimated to rise +.7% versus a +.65 gain in January.
10:00 am EST
- The Richmond Fed Manufacturing Index for April is estimated to fall to 2.0 versus 3.0 in March.
- New Home Sales for March are estimated to rise to 416K versus 411K in February.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI data, 2Y T-Note auction and the weekly retail sales reports could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology shares in the region. I expect US stocks to open mixed and weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- ISE Sentiment Index 80.0 -17.53%
- Total Put/Call 1.01 -8.18%
Credit Investor Angst:
- North American Investment Grade CDS Index 81.98 -2.16%
- European Financial Sector CDS Index 167.0 -2.82%
- Western Europe Sovereign Debt CDS Index 99.68 -.67%
- Emerging Market CDS Index 236.08 -1.65%
- 2-Year Swap Spread 13.5 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -17.25 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $138.0/Metric Tonne unch.
- Citi US Economic Surprise Index -5.0 -.1 point
- 10-Year TIPS Spread 2.35 +3 basis points
Overseas Futures:
- Nikkei Futures: Indicating +113 open in Japan
- DAX Futures: Indicating +32 open in Germany
Portfolio:
- Higher: On gains in my retail, biotech and tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Spain Has EU’s Largest Deficit, Undermining Rajoy Pickup.
Spain’s budget deficit was the largest in the European Union last year,
underlining the challenge faced by Prime Minister Mariano Rajoy as he
is due to present a new plan to foster a recovery. The EU’s statistics
agency Eurostat today reported Spain’s deficit widened to 10.6 percent
of gross domestic product last year, ahead of Greece’s 10 percent of GDP
gap, swollen by the cost of bailing out its banking system. That
compares with 9.4
percent in 2011. The Spanish premier pledged on April 17 to unveil measures
this Friday to make the euro region’s fourth-largest economy
more flexible and competitive. That announcement will end a week
of reports ranging from an estimate of gross domestic product in
the first quarter to data showing if unemployment reached
another record.
- Banks Face Revenue Losses of $17 Billion, Deutsche Bank Says. Investment banks may lose $17 billion of revenue in fixed income,
currencies and commodities by 2016 because of levies and regulation,
according to a Deutsche Bank AG report. European securities firms will bear most of the erosion as a tax on financial
transactions cuts sales and trading volumes, Deutsche Bank analysts
including Matt Spick, wrote in a note to clients today. The next “wave”
of regulation on over-the- counter derivatives and clearing may spur
smaller competitors to exit the businesses, they said. “We
see risks that multiple regulations, especially the
financial-transaction tax, compound to deliver a sharp reduction in FICC
revenues in Europe,” said the analysts. “We already see signs of shifts
in market share in favor of U.S. investment banks, and we expect this
trend to continue.”
- European Stocks Rise on Italy President, BOJ Stimulus. European
stocks rose, rebounding from the biggest weekly drop in five months, as
Italy elected a president and the Group of 20 refrained from opposing
the Bank of Japan’s stimulus policies. UniCredit SpA climbed 2.7
percent as Italy’s two-year bond yield declined to a record low.
Delhaize (DELB) Group SA surged to a 17-month high as the Belgian
retailer’s profit beat estimates. Royal Philips Electronics NV (PHIA)
slid for a seventh day after earnings missed projections. The Stoxx
Europe 600 Index (SXXP) advanced 0.2 percent to 285.68
at the close of trading.
- Copper Sags as China Imports, U.S. Home Sales Dim Demand Outlook. Copper fell for a second straight
session in New York as lower imports into China and an
unexpected drop in U.S. home sales fueled concern that demand is
weakening in the two biggest users of the metal. Shipments of refined copper into China in March dropped 37
percent from a year earlier, customs figures showed today.
Purchases of previously owned houses slid 0.6 percent to a 4.92
million annual rate last month, figures from the National
Association of Realtors showed today. That trailed the 5 million
rate projected in a Bloomberg survey of economists. “China’s been the biggest buyer of raw materials for the
past several years, so if they’re slowing, we’ll be in for a
bumpy summer,” John Petrie, a senior market strategist at Zaner
Group in Chicago, said in a telephone interview. “Commodities
in general are in a difficult spot right now.”
Wall Street Journal:
Zero Hedge:
Business Insider:
Reuters:
- Caterpillar(CAT) profit misses, cuts outlook on weak mining. Caterpillar Inc
posted disappointing quarterly results and cut its 2013 profit forecast
on Monday to reflect a drop in demand for heavy equipment from its
mining customers, and its shares turned lower in early trading.
- China says new bird flu case found in northeast. A man in the
northeastern Chinese province of Shandong has been infected by a new
strain of bird flu, the first case found in the province, state
news agency Xinhua said on Monday, bringing the total number of victims
in China to 105. The H7N9 virus has killed 20 people in China. Although
it is not clear how people are becoming infected, the World
Health Organization (WHO) says there is no evidence of the most worrying
scenario - sustained transmission between people.
- Canada to announce arrests after thwarting 'major terrorist attack' - CBC. Canadian police
and intelligence agencies will announce multiple arrests on Monday after
an operation to thwart a "major terrorist attack," the Canadian
Broadcasting Corporation reported, citing unidentified "highly placed"
sources.
The operation was coordinated with the U.S. Department of Homeland Security and the FBI, CBC said.
AP:
- FBI: No Ricin Found in Home of Mississippi Suspect. Investigators haven't found any ricin in the house of Mississippi man
accused of mailing poisoned letters to President Barack Obama, a U.S.
senator and a local judge, according to testimony Monday from an FBI
agent. Agent Brandon Grant said that a search of Paul Kevin Curtis' house in
Corinth, Miss., on Friday did not turn up ricin or ingredients for the
poison. A search of Curtis' computers has found no evidence so far that
he researched making ricin.
- South Korea, China angered by visit to Yasukuni war shrine by Japan gov't ministers. Japan's government said Monday that donations by the prime minister
to a controversial war shrine and visits by three Cabinet ministers were
made in an unofficial capacity, while neighbors China and South Korea
lodged protests over the actions. Yasukuni Shrine honors
Japanese wartime leaders convicted of war crimes among 2.5 million
Japanese killed in fighting during World War II. The shrine compound has
a war museum that glorifies Japan's wartime past, and the site is a
focus of nationalist pride among Japanese conservatives and
right-wingers. Visits to the shrine by political leaders
are routinely criticized by China and South and North Korea, which bore
much of the brunt of Japan's pre-1945 militarist march through Asia. The
visits are regarded as evidence that Japan's leaders do not acknowledge
their country's responsibility for its militarist past.
Telegraph:
Bild Zeitung:
- Company insolvencies in euro-area countries like Spain and Greece
that may rise by 33% this year will hurt German companies, citing
estimates of insurer Euler Hermes. Non-payments to German companies may
add up to EU31 billion.
Handelsblatt:
- AfD, a new political party set up to pull Germany out of euro,
would gain 19% of votes in a federal election, citing an on-line Mafo
Institute poll it commissioned.
ABC:
- Spain to Target 6% Budget Deficit This Year. Spain to release
medium-term budget plans April 26. EU set limit of 4.5% on Spanish
budget deficit for this year.
Xinhua:
- New Orders Decline for China's Machine Tool Makers. Drop in March
marked 22nd consecutive month of falling orders, citing data released
today. "No improvement" in 1Q, said Chen Huiren, deputy
secretary-general of China Machine Tool & Tool Builders'
Association.
Style Underperformer:
Sector Underperformers:
- 1) Oil Tankers -1.41% 2) Steel -1.11% 3) HMOs -1.08%
Stocks Falling on Unusual Volume:
- MCBC, WIT, CFNL, VRTX, EFII, AFSI, UTEK, AIRM, ASR, PHG, TAYC, IBM, CTSH, SWFT, OSIS, SAP, WGO, SBS, ACHC, INFA, TNC, RNF, SRPT, ALXN, BOH, CPHD and CR
Stocks With Unusual Put Option Activity:
- 1) DXJ 2) COH 3) CTSH 4) CAH 5) DISH
Stocks With Most Negative News Mentions:
- 1) UA 2) PENN 3) RIG 4) B 5) WYNN
Charts:
