Style Underperformer:
Sector Underperformers:
- 1) Education -7.92% 2) Biotech -2.38% 3) Telecom -1.71%
Stocks Falling on Unusual Volume:
- EW, PG, AMGN, FMX, VLY, TUP, AMCX, CFR, PEP, BCS, SO, RRC, UIS, FFIC, RES, CG, MSI, CTSH, PNRA, DV, EGOV, BBSI, PHI, ETH, AWAY, COR, SPNC, WYN, CSL, IDXX, IBB, TSS, SLAB, IRWD, FBC, CSL, T, FBC, JNPR and RHI
Stocks With Unusual Put Option Activity:
- 1) JNPR 2) GLW 3) JDSU 4) WDC 5) XLK
Stocks With Most Negative News Mentions:
- 1) IRWD 2) DV 3) EW 4) WYN 5) JNPR
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +2.89% 2) Oil Service +2.32% 3) Steel +1.69%
Stocks Rising on Unusual Volume:
- NFX, NGD, PBTH, CERS, BKI, LL, R, OC, YUM, BRCM, WLP, USG and OII
Stocks With Unusual Call Option Activity:
- 1) GLW 2) OC 3) LO 4) SYNA 5) OPK
Stocks With Most Positive News Mentions:
- 1) LMT 2) CIT 3) CB 4) WLP 5) WHR
Charts:
Evening Headlines
Bloomberg:
- Napolitano Set to Decide on Mandate for Italian Premiership.
Italian President Giorgio Napolitano is poised to announce his
selection for prime
minister after completing a round of talks with parliamentary leaders.
“We will adhere to the choices made by the president,” Enrico Letta, a
representative of Italy’s Democratic Party, said late yesterday after
meeting Napolitano at the presidential palace in Rome. An announcement
is due as soon as today, the president’s office said. Napolitano’s pick will have to unite the disparate forces
in Italy’s divided parliament to give the country a government
after an eight-week deadlock. This will be Napolitano’s second
attempt at resolving the impasse after his first choice, ex-
Democratic Party head Pier Luigi Bersani, failed last month to
win support from a majority of lawmakers.
- China Stocks Rise First Time in Three Days; Phone Shares Advance. Chinese
stocks rose after valuations on the benchmark index approached the
lowest level since Dec. 24, as telecommunication and technology
companies advanced. Chengdu Dr Peng Telecom & Media Group Co. jumped
to the highest level in two years. Zhejiang Dahua Technology Co.
climbed 4.9 percent to a record. Western Mining Co. rebounded from a
four-month low after first-quarter net income more than doubled.
Liquor-maker Sichuan Swellfun Co. (600779) lost 2.3 percent, leading
declines by consumer staples producers. The Shanghai Composite Index (SHCOMP) added 0.7 percent to 2,199.41 at the 11:30 a.m. local-time break. The measure plunged 2.6
percent yesterday as a gauge of manufacturing missed estimates
and trades at 12 times reported earnings.
- Rebar Trades Near Lowest in Four Months on Inventory Concerns.
Steel reinforcement-bar futures in Shanghai fell for a third day to the
lowest in more than four months as investors remained concerned about
high inventories. The contract for October delivery on the Shanghai Futures
Exchange declined as much as 0.5 percent to 3,581 yuan ($580) a
metric ton, the lowest level since Dec. 5, and was at 3,599 at
10:14 a.m. local time.
Wall Street Journal:
- Inside Merkel's Bet on the Euro's Future.
Angela Merkel listened in Vatican City as Pope Francis, in his
inaugural Mass last month, called on the powerful to care for the weak. A
few hours later, in her limousine to the airport, the German chancellor
took a phone call from the desperate president of Cyprus, Nicos
Anastasiades. "I need more solidarity," he pleaded, according to
officials familiar with the March 19 conversation. His parliament was
about to reject a euro-zone bailout deal. His tiny country faced ruin. "I won't negotiate with you," Ms. Merkel replied. "You need to talk
to the troika"—the International Monetary Fund, European Commission and
European Central Bank. It was a typical Merkel move: trying to play down Germany's dominant
role in reshaping Europe's currency union. Few in Europe believe it. However lightly Ms. Merkel treads, German strength in Europe is
raising tensions. Many Greeks and Spaniards blame Berlin's austerity
diktat for turning their countries' financial crises into economic
depressions. On Monday, European Commission President José Manuel Barroso warned that
German-backed austerity policies need to be softened because they lack
sufficient "political and social support" in hard-hit countries.
Germany's finance ministry retorted Tuesday that deficit-cutting is the
only way to rebuild investors' trust in the euro zone. This account of Ms. Merkel's handling of Europe's crisis, based on
interviews with 17 European policy makers, shows Cyprus's bailout
flowing directly from principles that will continue to guide German
leadership in Europe. In September, Ms. Merkel is expected
to win a third term as chancellor. That means her agenda will dominate
Europe's crisis response for years. The euro's survival hinges to a
considerable extent on whether her strategy works.
- Twitter Hoax Sparks Swift Stock Swoon. A
short-lived hoax on Twitter briefly erased $200 billion of value from
U.S. stock markets on Tuesday, underscoring the vulnerability of
financial markets to
computerized trading programs that buy and sell shares without human
intervention.
CNBC:
Zero Hedge:
Business Insider:
New York Times:
Reuters:
The Times:
- Europe’s tax on trading ‘will damage bond markets’. Serious doubts have been raised over Europe’s proposed tax on financial
transactions after civil servants from participating member states suggested
that it could drive up government borrowing costs and damage the functioning
of the bond market.
The Guardian:
Australian Financial Review:
- S&P Warns of Risk to AAA Rating. Standard & Poor’s has warned that Australia’s AAA rating could be
vulnerable in five years if the credit ratings agency doubts the government’s
commitment to restoring the surplus, national debt keeps rising and the economy
fails to self-correct.
Sankei:
- China Communist Party's Central Military Commission on Jan. 14 approved its navy to point its artillery and fire-control radar in the direction of Japan Self-Defense Force ships, citing several people with knowledge of the matter. China approved the measures as a method to threaten Japan ships; timing of provocation was left up to captains of navy vessels.
Shanghai Securities News:
- China's
economic growth will fall to below 7.5% in 2Q, citing Zhang Ping,
deputy head of the Chinese Academy of Social Sciences' economic
institute.
China Securities Journal:
- China's eastern city of Hangzhou will likely start a property tax trial next month, citing people familiar with the matter. Shenzhen and Beijing have submitted property tax plans to the central government.
Evening Recommendations
Susquehanna:
- Rated (ARO) Positive, target $18.
Night Trading
- Asian equity indices are +.50% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 111.0 -1.5 basis points.
- Asia Pacific Sovereign CDS Index 89.25 -.75 basis point.
- NASDAQ 100 futures +.06%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for March are estimated to fall -3.0% versus a +5.7% gain in February.
- Durables Ex Transports for March are estimated to rise +.5% versus a -.5% decline in February.
- Cap Goods Orders Non-defense Ex Air for March are estimated to rise +.3% versus a -2.7% decline in February.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +2,000,000 barrels versus a -1,233,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -600,000 barrels versus a -633,000 barrel decline the prior week. Distillate inventories are estimated to rise by +500,000 barrels versus a +2,364,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.5% versus a -.5% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The German/Italian 10Y auctions, 5Y T-Note auction, Germany IFO Index, Australian CPI and the weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by commodity and automaker 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.
Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- ISE Sentiment Index 100.0 +11.1%
- Total Put/Call .89 -12.75%
Credit Investor Angst:
- North American Investment Grade CDS Index 80.76 -1.57%
- European Financial Sector CDS Index 157.40 -5.86%
- Western Europe Sovereign Debt CDS Index 97.67 -2.02%
- Emerging Market CDS Index 233.58 -1.32%
- 2-Year Swap Spread 13.5 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -17.75 -.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $136.40/Metric Tonne-1.16%
- Citi US Economic Surprise Index -4.90 +.1 point
- 10-Year TIPS Spread 2.37 +2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +281 open in Japan
- DAX Futures: Indicating +20 open in Germany
Portfolio:
- Higher: On gains in my retail, biotech, medical and tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Euro-Area April Manufacturing, Services Contract. Euro-area services and factory output shrank for a 15th
month in April as the currency bloc struggled to emerge from a
recession, adding to pressure on the European Central Bank to do more to
boost growth. A composite index based on a survey of purchasing
managers in both industries held at 46.5, London-based Markit Economics
said today. That’s in line with the median of 26 economists’ forecasts
in a Bloomberg News survey. A reading below 50 indicates contraction.
The euro area’s woes were compounded today by concern global growth may
falter after a report showed Chinese manufacturing expanding at a slower
pace this month. “Added weakness in activity indicators and
continued easing in inflation indicators will raise the pressure on the
ECB to provide more stimulus,” said Jonathan Loynes, an economist at
Capital Economics Ltd. in London. “What form that will come in --
interest rate cuts, LTROs or even bolder steps - - remains to be seen.
The hurdles to the ECB undertaking some form of QE are a lot lower than
some people would suggest.”
- Paris Hit by Property Freeze as Taxes Deter Buyers. At least one in four Paris apartments listed by realtor Agence Etoile
can’t be sold, even with mortgage rates at record lows, as buyers and
sellers fail to agree on price, the company’s director said. “I have
some inventory that’s too expensive and sellers don’t want to lower
prices,” Christine Perrissel said in an interview. “Buyers are just much
more selective.” Across France, an economy that’s stalled for two
years, joblessness at a 15-year high, property prices near record highs
and new taxes have made households reluctant to borrow to buy homes.
- Government Bonds Surge as Italian, Irish Yields Drop to Records. European
government bonds rose, with Italy’s two-year yields falling to a
record, as euro-area output contracted for a 15th month in April,
boosting speculation the region’s central bank will lower interest rates.
The yield on Italian 10-year government bonds fell below 4 percent for
the first time in almost 2 1/2 years, while Spanish and Portuguese
yields dropped to the least since 2010. Borrowing costs in France and
Ireland declined to the lowest on record as
a purchasing managers’ index showed German services and
manufacturing unexpectedly shrank. Benchmark German 10-year bund
yields slid to the lowest since July.
- Euro Declines as Weak Data Fuel ECB Rate-Cut Bets. The
euro fell to a two-week low
against the dollar as a report showed weakening services and
manufacturing in the region, adding to speculation the European Central
Bank will lower interest rates to spur economic growth.
- Abe Vows to Protect Isles as Shrine Visits Hurt Japan-China Ties.
Japanese Prime Minister Shinzo Abe
vowed to use force if necessary to defend islands also claimed by China
as tensions rose over visits by his fellow lawmakers to a Tokyo shrine
seen in Asia as a symbol of wartime aggression. China and Japan each
issued formal protests today over the presence of each other’s vessels
in waters around the islands,
which lie in an area rich in resources including fish and oil.
Abe today told a parliamentary committee that the government
would not allow any Chinese boats to land on them. “In the unlikely event that they were to land, it would be
natural to expel them by force,” he said.
- Goldman Cuts Commodity Outlook as It Exits Bet on Gold Drop. Goldman Sachs Group Inc. cut its “near-term” outlook
for commodities and reduced forecasts for oil and coffee amid prospects
for weak demand from China to Europe. The bank also exited a bet on
lower gold prices. Goldman Sachs lowered its three-
and 12-month return forecasts for the Standard & Poor’s GSCI gauge
of 24 commodities to 2.5 percent, from 6 percent in three months and 3
percent in 12 months, and cut its near-term outlook on commodities to
neutral from overweight, according to the report, dated today. It exited
its bet on lower gold prices, with a potential gain of 10 percent,
while saying bullion may fall even more. “Commodity
returns have dropped sharply so far in April as weaker-than-expected
macroeconomic data releases in the U.S., Europe and China furthered
concerns around global economic growth,” New York-based analyst Samantha
Dart said in the report. “The negative sentiment in the market has weighed on cyclical commodity prices in particular.” The
GSCI index slid as much as 1.1 percent today as a report showed Chinese
manufacturing expanded at a slower-than- expected pace, providing more
evidence of a pullback in the country’s economic growth. Commodities,
which touched a nine- month low on April 18, are down 6.4 percent this
year.
- Zell Sells as Washington Faces Glut of Apartments: Real Estate. Washington is poised to be one of the only major U.S. cities with a
decline in apartment rents this year after a surge in construction
outpaced job growth, leaving the nation’s capital with a glut
of properties. The Washington metropolitan area,
including the suburbs of Maryland and Virginia, will see average rents
decrease as much as 2 percent, making it only market other than Detroit
to have a drop among the top 20 U.S. cities, according to Delta
Associates. Rents will fall further in 2014, data from the Alexandria,
Virginia-based property-research firm show.
- Too-Big-to-Fail Bill Increases Big Banks’ Capital Standards. Banks with more than $500 billion
in assets would face higher capital standards meant to reduce
risk and end an implied subsidy for the biggest lenders under a
bill to be introduced tomorrow by two U.S. lawmakers. Senators
Sherrod Brown, an Ohio Democrat, and David Vitter, a Louisiana
Republican, said in a roundtable discussion in Washington today that
their “too big to fail” legislation will
focus federal assistance on core commercial banking activities
while granting regulatory relief to community banks.
Wall Street Journal:
- The Boston Bombings: Live Updates.
- Republicans Say Fed ‘Willfully’ Withholding Documents. Two House Republicans have threatened to subpoena the Federal Reserve
for nonpublic documents on how the central bank plans to wind down its
more than $3 trillion bond portfolio without harming the nation’s
economy.
- What to Watch for in Apple’s(AAPL) 2Q Earnings.
- Germany Spurns Calls to Loosen Austerity Stance. Germany on Tuesday rebuffed growing calls for the euro zone to ease
its austerity drive and urged member states to stick to fiscal
consolidation and structural overhauls, a sign that the gulf between
Berlin and its partners on how to pull Europe out of its crisis is
widening. The German finance ministry said continuing current policies is the
only way out of the crisis, despite recent calls from France, the U.S.,
the International Monetary Fund, and the European Commission to stem
front-loading austerity and increase efforts to boost growth. "Through continuing our policies of growth-friendly consolidation we
are systematically building up the trust of international investors lost
in the crisis," the finance ministry said.
Fox News:
- Israeli military official says Assad has used chemical arms in civil war. A senior Israeli military official says Syrian President Bashar Assad
has used chemical weapons in his battle against insurgent groups trying
to topple him. Brig. Gen. Itai Brun, the head of
research and analysis in Israeli military intelligence, told a security
conference on Tuesday that Assad has used chemical weapons "in a number
of incidents."
CNBC:
- China’s PMI Miss: Is It Downhill From Here? "It's a big miss. Confidence in the outlook for China has really
diminished, particularly after first quarter growth data," said Tim
Condon, head of research for Asia at ING. "People are now reforming
their views on economy. The new view is that growth will be stagnant,"
he added.
Zero Hedge:
Business Insider:
Washington Post:
Reuters:
- GLOBAL ECONOMY-Manufacturing data stokes fears of global spring swoon.
- German April Manufacturing PMI 47.9, MNI Says.
- Bank of Spain forecasts Q1 GDP to fall 0.5 percent on quarter. The
Bank of Spain said on Tuesday it estimated first quarter gross domestic
product would fall 0.5 percent from the previous quarter and 2 percent
from the year-ago period, due to sluggish consumer demand. "The Spanish economy will prolong a contraction of economic
activity during the first quarter of 2013, although at a lesser
pace than that seen at the end of last year," it said in its
quarterly economic report.
- Factory data a new sign of slowing U.S. economic growth. U.S. factory activity
expanded at its slowest pace in six months in April, the latest
sign that economic growth continued to lose momentum early in
the second quarter, though the recovery has not been derailed.
- Copper falls to fresh 1-1/2 year low on weak China data.
- UN lowers Latin America 2013 growth view on Brazil, exports. A downward-revised projection for growth in regional powerhouse Brazil, and easing demand for the
commodities-dependent region's exports are seen weighing on
growth this year.
- Mid-sized companies less likely to spend to expand-survey. Fewer mid-sized companies
expect to make additional investments in their businesses or
seek more loans than a year ago, according to a survey in the
United States by banking giant JPMorgan Chase & Co.
Only 35 percent of executives at the companies said they
anticipate increasing capital spending in the next 12 months,
down from 44 percent a year earlier, according to the survey
released on Tuesday by the bank. It found that 16 percent said they will likely cut back on business investments, up from 13 percent who last year expected
to retreat.
- Merkel defiant as austerity criticism mounts. Angela Merkel tried to contain
her irritation when asked at a podium discussion in Berlin this
week whether southern European countries could take much more
German-ordered austerity. But the
frustration in her voice was clear enough after a week in which several
European allies broke ranks, and in a public challenge to Germany,
effectively declared the era of deficit reduction in Europe to be over. "I call it balancing the budget," the German chancellor told
her audience at a book presentation. "Everyone else is using
this term austerity. That makes it sound like something truly
evil." Merkel's appearance in Berlin this week, and the
reaction of her closest allies to suggestions by the European Commission
that euro member states loosen their fiscal reins, shows Germany will
not soften its position. "Declaring an end to consolidation is absolute
nonsense," Michael Fuchs, deputy leader for Merkel's Christian Democrats
(CDU) in parliament, told Reuters. "In truth no one is really
saving anyway, they're just issuing less debt than before."
USA Today:
UPI:
- Retail Sales Up Slightly in Week. U.S. retail receipts rose 0.8 percent in the week ending Saturday, a U.S. trade group said. The
International Council of Shopping Centers-Goldman Sachs weekly sales
report said sales climbed 0.8 percent week to week and 1.9 percent
compared to the same week a year earlier. The trade group said it was a
strong week for staples. Sales of basic
items "seemed to perform best over the past week with notable
improvement at grocery stores and discounters." Business was weaker at a broad range of stores, including
electronics, office supply, clothing, department stores and drug stores,
the weekly consumer tracking survey found.
Financial Times:
- OECD sounds fresh warning on Japan. The
OECD has warned Japan that taming its vast debts remains the country’s
“paramount policy challenge”, as prime minister Shinzo Abe goes all out
to reflate the sluggish economy via aggressive fiscal and monetary
stimulus.
Telegraph:
Bild:
- Italy's Five-Star Movement leader Beppe Grillo says state will
run out of revenue in September or October, in an interview. "It will
have difficulty paying out pensions and wages," he said. Re-election of
Giorgio Napolitano to presidency amounts to a "cunning coup d'etat," he
said.
Finanz und Wirtschaft:
- Pimco
is Reducing Risky Assets in Portfolios. PIMCO is slowly and globally
selling risky assets that have developed "exceptionally well" until
recently, CEO Mohamed El-Erian said in an interview. Says assets include
bank bonds, high-yield corporate bonds. Says Pimco concentrates on
robust balance sheets and success stories that are based on real growth.
Says Pimco avoids "artificial" liquidity-assisted growth.
El Pais:
- EC May Allow Spain 2013 Budget Deficit at 6.5%. The new target
compares with current target of 4.5%, citing people familiar with the
matter. Spain will have until 2016 to reduce budget deficit to 3%
compared with 2014 current deadline. France and Portugal will have one
additional year to meet their budget deficit targets.
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:
