Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 101.0 -36.0%
- Total Put/Call .84 -6.67%
Credit Investor Angst:
- North American Investment Grade CDS Index 74.91 -1.91%
- European Financial Sector CDS Index 145.66 -4.79%
- Western Europe Sovereign Debt CDS Index 94.33 unch.
- Emerging Market CDS Index 229.30 -1.09%
- 2-Year Swap Spread 13.75 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -17.75 +.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $134.10/Metric Tonne unch.
- Citi US Economic Surprise Index -1.7 +3.6 points
- 10-Year TIPS Spread 2.34 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +29 open in Japan
- DAX Futures: Indicating +21 open in Germany
Portfolio:
- Slightly Higher: On gains in my retail/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Euro-Area Unemployment Increases to Record 12.1% Amid Recession. The euro-area jobless rate rose to a record in March, increasing
pressure on the European Central Bank to take additional measures to
boost growth. The euro-area unemployment rate advanced to 12.1
percent from 12 percent in the previous two months, the European
Union’s
statistics office in Luxembourg said today. That’s in line with the
median of 31 economists’ estimates in a Bloomberg News survey. Soaring
unemployment “cannot be ignored, because this is the biggest
fragmentation that is happening in Europe,” ECB Vice President Vitor
Constancio said on April 25. “It’s even worse in what regards youth
unemployment.” Today’s report showed that 19.2 million people were
jobless in the euro area in
March, up 62,000 from the previous month. Youth unemployment was at 24
percent.
- German Unemployment Climbs in Sign Economic Recovery Delayed.
German unemployment rose for a second month in April, adding to signs
that Europe’s largest economy is struggling to recover from a slump at
the end of last year. The number of people out of work climbed a
seasonally adjusted 4,000 to 2.94 million, the Nuremberg-based Federal
Labor Agency said today. Economists predicted an increase of 2,000,
according to the median of 29 estimates in a Bloomberg News survey. The
adjusted jobless rate held at 6.9 percent, just above a two-decade low of 6.8 percent.
- Slovenia Bank Rescue at 20% of GDP Means No Escaping EU Aid. Slovenia, the first former
Communist nation in the euro zone, is facing a typically
capitalist dilemma: whether to protect creditors of big banks. Rising loan losses resulting from a housing bust and a
second recession in two years have left a hole of about 7.5
billion euros ($9.8 billion) at Slovenia-based lenders,
investment bank Keefe Bruyette & Woods estimates. That’s a lot
for a 35 billion-euro economy: A bank bailout would push
government debt above 70 percent of economic output. Even after a successful domestic debt sale two weeks ago,
the country may need assistance from the European Union, and
holders of bank bonds, including the most senior creditors,
could be forced to take losses, according to Raoul Ruparel, head
of research at London-based Open Europe. Such a bail-in, which
would be the second in the euro zone, after Cyprus, risks
deepening divergence in the monetary union by keeping borrowing
costs higher in economically weak nations.
- Fiat Industrial Cuts 2013 Goals on Iveco Europe Truck Sales. Fiat Industrial SpA (FI), the truck and
tractor maker spun off from car manufacturer Fiat SpA (F) in 2011,
cut earnings and sales targets for 2013 as a recession in Europe
led to a first-quarter loss at the Iveco vehicle unit. Revenue will rise as much as 4 percent, compared with a
previous forecast of 5 percent, Turin, Italy-based Fiat
Industrial said today in a statement. The trading profit margin
will amount to 7.5 percent to 8.3 percent of revenue, versus an
earlier range prediction of 8.3 percent to 8.5 percent. Amid a recession in the 17 countries sharing the euro,
demand for commercial vehicles in Europe fell for a 15th
consecutive month in March. MAN SE (MAN), the region’s third-largest
producer, lowered its earnings forecast for 2013 on April 26
because of the contraction. Industrywide first-quarter sales of
trucks weighing more than 3.5 tons dropped 17 percent to 64,198
vehicles, according to the ACEA trade group. “The news is clearly negative and not discounted,” said
Gabriele Gambarova, an analyst at Banca Akros in Milan. “Iveco
encountered more difficult market conditions.” Fiat Industrial dropped as much as 5.1 percent to 8.59
euros, the biggest intraday decline since March 19, and was
trading down 4.7 percent at 4:20 p.m. in Milan, valuing the
manufacturer at 10.5 billion euros.
- European Stocks Fall, Trimming 11th Straight Monthly Gain. European
stocks declined, paring an 11th straight month of gains, as a report
showed business activity in the U.S. unexpectedly shrank this month.
Lonmin Plc tumbled 5.7 percent after shuttering a South African
platinum furnace. Fiat Industrial SpA sank the most in 11 months after
cutting its 2013 earnings target. UBS (UBSN) AG surged the most in six
months as profit exceeded analysts’ projections. Deutsche Bank AG
rallied the most since September after Germany’s largest lender
announced plans to raise as much as
$6.5 billion in capital.
- IBM(IBM) Raises Dividend 12%, Adds $5 Billion in Stock Buybacks.
International Business Machines Corp. (IBM), the biggest
computer-services company, boosted its dividend 12 percent and approved
$5 billion in stock buybacks, rewarding investors after a disappointing
earnings report. The dividend of 95 cents a share will be payable on
June 10 to shareholders of record on May 10, IBM said today from its
annual meeting in Huntsville, Alabama. With the additional
buyback funds, IBM has $11.2 billion in its repurchase program.
- Yellen Has the Right of First Refusal at Fed, Meyer Says. Federal Reserve Vice Chairman Janet Yellen has the “right of first refusal” to become the next
leader of the central bank when Ben S. Bernanke’s term ends in
January, said former Fed governor Laurence Meyer. Meyer, speaking at
a Bloomberg Link panel in Washington, said it’s “a bit surprising” that
Bernanke couldn’t manage his calendar to allow him to take part in this
year’s Fed conference in Jackson Hole, Wyoming.
- Dollar Drops on Weak Data as Fed Meets; Euro Gains on ECB Bets. The dollar fell versus most major
peers as business activity in the U.S. unexpectedly shrank for
the first time in more than three years amid bets the Federal
Reserve won’t slacken its bond buying under quantitative easing.
- Copper Users Press London Exchange to Reduce Warehouse Backlogs. A group of industrial copper users
is pressing the London Metal Exchange to reduce growing queues
at warehouses that they say are contributing to supply
constraints and rising fees.
Fox News:
- Obama walks back 'red line' stance on Syrian government using chemical weapons. President Obama, who earlier said use of chemical weapons by Syria on
its people would be a “red line” requiring action by the U.S., walked
the stance back on Tuesday, saying he needs more information on the
reported attacks before responding.
- Special forces could've responded to Benghazi attack, whistle-blower tells Fox News.
A military special ops member who watched as the deadly attack on the
U.S. Consulate in Benghazi unfolded last September told Fox News the
U.S. had highly trained forces just a few hours away, and said he and
others feel the government betrayed the four men who died in the attack.
Speaking on condition of anonymity, and appearing in a Fox News
Channel interview with his face and voice disguised, the special
operator contradicted claims by the Obama administration and a State
Department review that said there wasn’t enough time for U.S. military
forces to have intervened in the Sept. 11 attack in which U.S.
Ambassador to Libya Chris Stevens, an embassy employee and two former
Navy SEALs working as private security contractors were killed. “I know for a fact that C-110, the EUCOM CIF, was doing a training
exercise in … not in the region of North Africa, but in Europe,” the
operator told Fox News' Adam Housley. “And they had the ability to act
and to respond.”
CNBC:
- The Fed Is Destroying Jobs: Ken Griffin. Ken Griffin, the head of the Chicago-based hedge fund Citadel, is not at all pleased with Ben Bernanke.
According to Griffin, low interest rates have encouraged businesses to
invest in technology that reduces the demand for human labor. Meanwhile,
health care reforms have increased the cost of human capital—so it's a
double whammy.
- Sex Superbug Could Be 'Worse Than AIDS'.
Zero Hedge:
Business Insider:
Reuters:
- Cummins(CMI) profit drops sharply, shares tumble 5 pct. Cummins Inc reported a sharper-than-expected drop in first-quarter earnings on Tuesday, citing weak demand for its turbines and engines, especially from the mining and oil and gas industries. The company's shares tumbled 5 percent in morning trading.
- METALS-Copper shows steepest monthly fall since last May.
- Empty shops, tight wallets threaten France with recession. French
consumers bought fewer
cars, tables and chairs, and clothes in the first part of the
year, challenging the government's pledge to steer the euro
zone's second largest economy away from recession. Consumer spending
accounts for more than half of France's output and is the motor of the
economy. It fell last year for the first time in 19 years. Record
unemployment is still pushing households to keep their wallets closed.
An unexpected rebound in March, largely due to heating staying on
through cold weather, was not enough to stop a 0.4 percent January to
March quarterly decline. The data prompted Jacques Creyssel, head of the
FCD business federation, to warn of a fresh contraction in purchasing
power
this year.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -1.93% 2) Homebuilding -1.30% 3) Education -1.28%
Stocks Falling on Unusual Volume:
- SBS, AVEO, MPC, CIE, PFE, RIO, BBL, TNAV, LGCY, BNCL, XYL, TFX, PFMT, BWLD, PCL, MAS, CMI, EGOV, NEM, SLCA, ANV, AEIS, PBI and NUAN
Stocks With Unusual Put Option Activity:
- 1) AVEO 2) PBI 3) ESRX 4) GNW 5) NUAN
Stocks With Most Negative News Mentions:
- 1) GRMN 2) CPTS 3) PBI 4) NUAN 5) DISH
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Networking +.97% 2) Oil Tankers +.69% 3) Retail +.68%
Stocks Rising on Unusual Volume:
- UBS, IRF, DB, MPWR, SU, WAIR, OIS, HTWR, MGAM, HPY, GTLS, IVZ, DPZ, BBY, AVP, TXRH, VSH and AGCO
Stocks With Unusual Call Option Activity:
- 1) HNZ 2) LTD 3) PSX 4) NUAN 5) SIRI
Stocks With Most Positive News Mentions:
- 1) T 2) OXY 3) HTWR 4) IBM 5) CNH
Charts:
Evening Headlines
Bloomberg:
- Italy’s Letta Plans to Follow EU Budget Rules, Prepares Tax Cuts. Italian Prime Minister Enrico Letta
is heading to Berlin on his second full day in office to present
his economic growth plan to German Chancellor Angela Merkel.
The program calling for tax cuts for business, consumers
and homeowners won a confidence vote in the Italian Parliament
yesterday and garnered the approval of bond investors, who
pushed 10-year government yields to the lowest in two-and-a-half
years. Merkel and Letta will hold a press conference at 6 p.m.
and then speak over dinner.
- U.K. April Consumer Confidence Unexpectedly Declines, GfK Says.
U.K. consumer confidence unexpectedly declined in April as inflation
(UKRPCJYR) extended its run above the Bank of England’s goal, increasing
households’ concern about their personal finances. A sentiment index by GfK NOP Ltd. fell one point to minus
27, the London-based group said in a report today. Economists
had forecast no change, according to the median of 19 estimates
in a Bloomberg News survey. A gauge of how consumers see their
finances over the next year fell to minus 7 from minus 6.
- Japan-to-Korea Output Misses Estimates as Taiwan Cools. Japanese and South Korean industrial output was less than
estimates in March and Taiwan’s first-quarter growth was half the
forecast pace as weakness in global demand limits recoveries in Asian
economies. In Japan, production climbed 0.2 percent from the
previous month, the trade ministry said in Tokyo today. That was less
than the median 0.4 percent forecast in a Bloomberg News survey of 27
economists. South Korea’s output fell 2.6 percent, a separate report
showed. Taiwan’s gross domestic product rose 1.54 percent. Today’s
data add to signs of a cooling global economy after U.S. gross domestic
product rose less than forecast in the first quarter and China reported
an unexpected slowdown. “Overseas demand gathered momentum in the past few months, but the pace
of growth is moderating a bit now,” said Junko Nishioka, chief economist
at Royal Bank of Scotland Group Plc (RBS) in Tokyo and a former Bank of
Japan official. “Shipments of cars to the U.S. are slowing.”
- China
Surprise Gauge Sees Aussie Below Parity: Chart of the Day. China's
economic slowdown and falling commodity prices will help snap the
Australian dollar's record 10-month stretch above parity with its U.S.
counterpart, according to Brown Brothers Harriman. Citigroup's Economic
Surprise Index for China slid to negative -27.9, a level unseen since October, signaling actual economic
data lagged behind the median estimates in Bloomberg surveys of
analysts. "In addition to China, considering the current state of
commodity prices, I see strong demand to reduce long positions on the Aussie," said Masashi Murata, a currency stategist in Tokyo at Brown Brothers.
- Copper Set for Worst Month Since May as Demand Concern Grows. Copper
dropped, poised for the
biggest monthly decline since May, as weakness in Japanese and
South Korean industrial output added to global demand concerns. Copper
for delivery in three months on the London Metal
Exchange fell as much as 0.7 percent to $7,104 a metric ton and was at
$7,128 at 10:26 a.m. in Tokyo. The metal has retreated 5.5 percent this
month. Futures for delivery in July on the Comex were little changed
at $3.2265 per pound. Markets in China are closed through May 1 for
public holidays.
Wall Street Journal:
- Female DNA Found on Bomb in Boston. Investigators Unsure Whether Evidence Means a Woman Aided in
the Attack; Russians Allege Suspect's Ties to Jihadists. Investigators have found female DNA on at least one of the bombs used in the
Boston Marathon attacks, though they haven't determined whose DNA it is or
whether its presence means a woman helped the two brothers suspected in the
bombings, according to U.S. officials briefed on the probe. In another development, Russian officials revealed details about contacts
between the older brother and suspected Islamist radicals in the Caucasus,
including Internet exchanges that led to concerns by investigators that he was
trying to join up with jihadist fighters.
- Debt and Growth. Attacking Reinhart-Rogoff to revive the spending machine. Perhaps you've read that America's debt burden is no longer a problem.
Former White House economist Larry Summers says the U.S. should borrow
even more money today because interest rates are low, and his Keynesian
brethren are busy trying to discredit economists Kenneth Rogoff and
Carmen Reinhart for their famous claim that a country's economic growth
begins to fall when debt hits 90% of GDP. Time for Stimulus 5.0!
Fox News:
- Obama administration officials threatened whistle-blowers on Benghazi, lawyer says. At least four career officials at the State Department and the
Central Intelligence Agency have retained lawyers or are in the process
of doing so, as they prepare to provide sensitive information about the
Benghazi attacks to Congress, Fox News has learned. Victoria Toensing, a former Justice Department official and
Republican counsel to the Senate Intelligence Committee, is now
representing one of the State Department employees. She told Fox News
her client and some of the others, who consider themselves
whistle-blowers, have been threatened by unnamed Obama administration
officials. “I'm not talking generally, I'm talking specifically about Benghazi –
that people have been threatened,” Toensing said in an interview
Monday. “And not just the State Department. People have been threatened
at the CIA.”
MarketWatch.com:
CNBC:
- Flood of Easy Money Putting This Region at Risk. The risk of asset bubbles in Southeast Asia's fastest-growing emerging
economies is rising, warn economists, pointing to red flags including
surging domestic credit growth and rapidly rising property prices.
Zero Hedge:
Business Insider:
Reuters:
- Japan March retail sales fall 0.3 pct year/year. Japanese retail sales fell 0.3
percent in March from a year earlier, government data showed on
Tuesday, down for a third straight month, in a sign the economic
recovery is proceeding at a slow pace.
The fall compared with the median market forecast for a 0.6
percent annual increase.
Financial Times:
- Fed faces calls for radical reform. A
senior Republican congressman has called for everything from the gold
standard to a price level target to be on the table in a 100th
anniversary review of the Federal Reserve’s mandate. Kevin Brady, who chairs the joint economic committee, wants
Congress to appoint a bipartisan commission that could lead to a radical
change in the mandate of the world’s largest and most important central
bank.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.0 -4.5 basis points.
- Asia Pacific Sovereign CDS Index 87.0 -1.0 basis point.
- NASDAQ 100 futures +.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The 1Q Employment Cost Index is estimated to rise +.5% versus a +.5% gain in 4Q.
9:00 am EST
- The S&P/CS 20 City MoM% SA for February is estimated to rise +.9% versus a +1.0% gain in January.
9:45 am EST
- The Chicago Purchasing Manager Index for April is estimated to rise to 52.5 versus 52.4 in March.
10:00 am EST
- Consumer Confidence for April is estimated to rise to 61.0 versus 59.7 in March.
Upcoming Splits
Other Potential Market Movers
- The Eurozone Unemployment Rate, China Government Manufacturing PMI, US Loan Officer Survey, Canada GDP report, NAPM-Milwaukee for April, weekly retail sales reports, Needham Healthcare Conference and the Barclays Retail/Consumer Discretionary Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 160.0 +41.69%
Credit Investor Angst:
- North American Investment Grade CDS Index 76.18 -2.6%
- European Financial Sector CDS Index 152.99 -3.94%
- Western Europe Sovereign Debt CDS Index 94.33 -.97%
- Emerging Market CDS Index 233.15 -2.61%
- 2-Year Swap Spread 13.75 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -18.0 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $134.10/Metric Tonne unch.
- Citi US Economic Surprise Index -5.3 +7.1 points
- 10-Year TIPS Spread 2.36 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +46 open in Japan
- DAX Futures: Indicating +48 open in Germany
Portfolio:
- Higher: On gains in my retail/biotech/tech/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
