Today's Market Take:
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 122.0 +62.67%
- Total Put/Call .74 -24.49%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.10 +1.71%
- European Financial Sector CDS Index 134.58 -1.39%
- Western Europe Sovereign Debt CDS Index 90.34 +2.28%
- Emerging Market CDS Index 233.48 +1.16%
- 2-Year Swap Spread 13.5 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -14.0 +.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- China Import Iron Ore Spot $129.60/Metric Tonne-.46%
- Citi US Economic Surprise Index -7.3 -.4 point
- 10-Year TIPS Spread 2.34 +4 bps
Overseas Futures:
- Nikkei Futures: Indicating +213 open in Japan
- DAX Futures: Indicating +20 open in Germany
Portfolio:
- Higher: On gains in my retail/medical/biotech/tech sector longs and emerging markets shorts
- Market Exposure: 50% Net Long
Bloomberg:
- U.K. Construction Output Declines to Lowest Since 1998.
U.K. construction output fell to its lowest level in more than 14 years
in the first quarter as work on new building projects declined across
the industry. Output measured by volume dropped 2.4 percent from the
previous three months to its lowest since the fourth quarter of 1998,
the Office for National Statistics in London said today.
That compares with the 2.5 percent decline estimated in gross
domestic product data on April 25.
- Carson Block Says He’s Shorting Debt of Standard Chartered.
Carson Block, the short seller who runs Muddy Waters LLC, said he is
betting against the debt of Standard Chartered Bank Plc because of the
“deteriorating” quality of its loan book. Block said the
London-based bank’s $1 billion loan to Samin Tan, chairman of Bumi Plc
(BUMI), the coal company at the center of a dispute between co-founders
Nathaniel Rothschild and Indonesia’s Bakrie family, and loans to Far
East Energy Corp. (FEEC), were ‘red flags.’ Standard Chartered will also
come under stress when China’s economy slows down, Block said. “We
believe the quality of Standard Chartered’s loans are deteriorating,”
Block said at the SkyBridge Alternatives Conference in Las Vegas today.
- Mexico Industry Output Falls Three Times More Than Forecast. Output slid 4.9 percent from a year earlier, the biggest
decline since the end of the 2009 recession and more than the
1.4 percent median estimate of 16 economists surveyed by
Bloomberg. Manufacturing contracted 5.8 percent and construction
fell 5.2 percent, the national statistics institute said on its
website today.
- Dollar Rally Spurs Commodity Selloff as U.S. Stocks Fluctuate. The Dollar Index extended its biggest
two-day rally since July, triggering plunges in oil and gold,
and Treasuries tumbled. U.S. stocks retreated, trimming a third
straight weekly gain. The Dollar Index, a gauge of the currency against six major
peers, added 0.6 percent to 83.27 at 12:37 p.m. in New York to
extend its two-day advance to 1.7 percent.
- OPEC Crude Production Rises to Five-Month High on Saudi Increase. OPEC boosted crude output in April to
the highest in five months as Saudi Arabia increased production,
helping lower oil prices amid concern that global economic
growth is slowing. The Organization of Petroleum Exporting Countries produced
30.46 million barrels a day last month, up from 30.18 million in
March, the group’s Vienna-based secretariat said today in its
Monthly Oil Market Report. That’s the most since November. The
estimates are based on secondary sources.
- Bernanke Sees Important Risks in Wholesale Funding. Federal Reserve Chairman Ben S. Bernanke said risks persist
in wholesale funding markets used frequently by Wall Street brokers to
finance securities trading. “Important risks remain in the
short-term wholesale funding markets,” Bernanke said today in a speech
at a Chicago Fed banking conference. “One of the key risks is how the
system would respond to the failure of a broker-dealer or other major
borrower.”
- Credit Pinch for Small Business Impedes U.S. Job Growth.
Tighter lending standards among U.S. community banks help
explain why small businesses are adding jobs at only half the pace of
large employers. The Federal Deposit Insurance Corp. says the 6,900
institutions it classifies as community banks
supply almost half of small business loans.
Wall Street Journal:
- Investors Rediscovering Margin Debt. Small investors are borrowing against their portfolios at a rapid
clip, reaching levels of debt not seen since the financial crisis. The trend—driven by a combination of rising stock values and
rock-bottom interest rates—is sparking a growing debate among market
watchers. To some, this trend in so-called margin debt is a sign of investors'
increasing confidence in a bull market for stocks that has already
lifted the Dow Jones Industrial Average 15.1% in 2013. But to others it is a warning sign that the Federal Reserve's
easy-money policies are creating a bubble mentality among stock
investors.
- U.S. Expects Record Corn Crop.
U.S. corn futures added to their losses Friday after the government
forecast a record crop. The U.S. Department of Agriculture, in a monthly
crop report,
forecast that greater-than-expected domestic supplies in the next year.
As of Aug. 31, 2014—the end of the crop year that will begin with this
autumn's harvest—the report predicts stockpiles will total 2.004 billion
bushels. Analysts in an earlier Dow Jones Newswires poll had on average
expected a forecast of 1.973 billion bushels. The projection would mark
the highest level for late-summer corn stockpiles since 2005.
Fox News:
- Texas officials launch criminal investigation into fertilizer plant explosion that killed 14. Texas law enforcement officials on Friday launched a criminal
investigation into the massive fertilizer plant explosion that killed 14
people last month. Investigators have largely
treated the West Fertilizer Co. blast that killed 14 people as an
industrial accident, but the Texas Department of Public Safety said in
statement that the agency has now instructed the Texas Rangers and the
McLennan County Sheriff's Department to conduct a criminal probe.
CNBC:
- Jack Lew: Debt Ceiling Won't Be Reached Until Labor Day. U.S. Treasury Secretary Jack Lew told CNBC on Friday that the U.S.
debt ceiling would not be reached until September, though he said it was
not an excuse for Congress to relax. "The debt limit will be
reached in just a few days when it expires on May 18 but because of the
cash flows we can predict that we will be okay until Labor Day," Lew
told CNBC in an interview in London.
Zero Hedge:
Business Insider:
LA Times:
Reuters:
USA Today:
- IRS apologizes for targeting conservative groups. The Internal Revenue Service apologized Friday for inappropriately
flagging conservative political groups for additional reviews during the
2012 election to see if they were violating their tax-exempt status. Lois
Lerner, who heads the IRS unit that oversees tax-exempt groups, said
organizations that included the words "tea party" or "patriot" in their
applications for tax-exempt status were singled out for additional
reviews. Her remarks came at an American Bar Association gathering.
ABC News:
- Exclusive: Benghazi Talking Points Underwent 12 Revisions, Scrubbed of Terror Reference. When
it became clear last fall that the CIA’s now discredited Benghazi
talking points were flawed, the White House said repeatedly the
documents were put together almost entirely by the intelligence
community, but White House documents reviewed by Congress suggest a
different story. ABC News has obtained 12 different versions of
the talking points that show they were extensively edited as they
evolved from the drafts first written entirely by the CIA to the final
version distributed to Congress and to U.S. Ambassador to the U.N. Susan
Rice before she appeared on five talk shows the Sunday after that
attack.
Telegraph:
- Spain is officially insolvent: get your money out while you still can. I'd not noticed this until someone drew my attention to it, but the
latest IMF Fiscal Monitor, published last month, comes about as close
to declaring Spain insolvent as you are ever likely to see in official
analysis of this sort. Of
course, it doesn't actually say this outright. The IMF is far too
diplomatic for such language. But that's the plain meaning of its latest
forecasts, which at last have an air of realism about them, rather than
being the usual dose of wishful thinking.
- G7: US warns Japan to stick to rules on currency. Japan is pushing the boundaries of international agreements to avoid
competitve currency devaluations, the US Treasury Secretary has warned, as
the International Monetary Fund said unprecedented monetary easing could
lead to a "serious boom and bust".
Market News International:
- China Banks Face More Curbs On Wealth Products. People's Bank of China and China Central Depository & Clearing notified banks that their wealth management
product accounts can't trade among themselves or with the bank's own
proprietary trading account, citing traders. New regulations will make
the process of how banks are allowed to offload assets underlying wealth products more complicated.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -1.80% 2) Coal -1.71% 3) Steel -1.57%
Stocks Falling on Unusual Volume:
- EGY, DK, TCB, CIB, HES, ANAC, TEO, APO, AMAP, GLPW, CHE, KYAK, OPTR, PANL, ET, OFIX, CEO, AIRM, SIRO, MDRX, CG, GHDX, CFN, MBI, AL, GEVA, NKA, NBL, BID, CTB, SFUN, FSP, TCB, EVEP and TNGO
Stocks With Unusual Put Option Activity:
- 1) FTK 2) TSLA 3) MU 4) SCHW 5) EWJ
Stocks With Most Negative News Mentions:
- 1) CCL 2) LTD 3) KSS 4) LVS 5) JCP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Biotech +.89% 2) Disk Drives +.87% 3) Hospitals +.73%
Stocks Rising on Unusual Volume:
- BT, TSLA, SZYM, TRLG, UBNT, PCLN, FTK, GPS, SCTY, WCRX, SWFT and SPWR
Stocks With Unusual Call Option Activity:
- 1) ABFS 2) TIVO 3) ROC 4) WAG 5) SQNM
Stocks With Most Positive News Mentions:
- 1) ABCO 2) GVA 3) BSX 4) TRLG 5) PEP
Charts:
Evening Headlines
Bloomberg:
- Italy Can Keep Tax Pledges Without Budget Cuts, Saccomanni Says. The Italian government won’t need to
make more budget cuts this year to finance a plan to ease taxes,
and it remains committed to suspending payment of an unpopular
property levy, Finance Minister Fabrizio Saccomanni said. The
government held a Cabinet meeting yesterday to suspend
the June payment of the tax on primary residences in a bid to
make good on Prime Minister Enrico Letta’s inauguration pledge. The
decision was put off until the next meeting, which may be held as soon
as May 12, when Letta’s new government holds a retreat at a monastery
near Siena, Italy, Saccomanni said on the
“Otto e Mezzo” program on La 7 television
- Swiss Watches Unworn as China Tackles Graft: Chart of the Day. (graph) The CHART OF THE DAY shows Chinese imports of Swiss-made watches tumbled
24 percent in the first quarter from a year earlier for a third
straight decline, while shipments to Hong Kong sank 9.3 percent,
according to trade data from Switzerland.
- Sony Misses Estimates as Hirai Drives Samsung Challenge. Sony Corp. (6758) forecast annual profit
that missed analysts’ estimates as Chief Executive Officer Kazuo Hirai
rolls out new Xperia smartphones and Bravia televisions to
recapture market share lost to Samsung Electronics Co.
- RBA Cuts CPI Outlook as Aussie, Mine-Boom Peak Weigh on GDP.
The Reserve Bank of Australia lowered its inflation outlook and
reiterated its forecast for “below trend” growth this year, reflecting
an elevated currency, a crest in resource investment and fiscal
tightening. “The outlook for non-mining business investment remains
relatively weak over the next few months,” the RBA said in its quarterly
monetary policy statement released in Sydney today. “The approaching
peak in resource investment, the high level of the Australian dollar and
ongoing fiscal consolidation are all likely to weigh on growth over the
next year or so, while at the same time the low level of interest rates
is helping to support
demand.”
- Commodity Investors Withdrew a Record $9.3 Billion Last Month. Investors
withdrew a record $9.3
billion from commodity exchange-traded products as gold sales
pushed the metal into a bear market, BlackRock Inc (BLK) said. The
outflow for commodities in April pushed the total for the first four
months this year to $17.8 billion, compared with inflows of $6 billion
for the same period last year, BlackRock said in a report dated
April 30. The previous record for commodity sales was $5.2 billion in
February. Gold outflows were an all-time high of $8.7 billion last month
as the metal slid to a two-year low in London on April 16, two sessions
after falling into a bear market. The Standard & Poor’s GSCI gauge
of 24 raw materials fell
4.7 percent last month, the most since May.
- Natural Rubber Imports by India Seen Falling as Car Sales Shrink. Natural rubber imports by India, the
world’s third-biggest user, are poised to drop for the first
time in five years from a record as declining car sales crimp
demand for the commodity used in tires. Inbound shipments are estimated to drop 17 percent to
180,000 metric tons in the year that started April 1 from an
all-time high of 217,364 tons a year earlier, Sheela Thomas,
chairman of the Rubber Board of India, said in an e-mailed
interview. The biggest slump in car sales since 2001 last year
boosted local rubber stockpiles 13 percent to 266,000 tons, and
will make up for a domestic shortfall in supplies, she said. Reduced demand from India may accelerate a decline in
futures in Tokyo, which have lost about 9 percent this year and
entered a bear market in April on signs that weak demand from
China, the largest user, will expand a global glut.
- Copper Pares Third Weekly Advance on China Demand Concern.
Copper declined, paring a third weekly advance, on speculation that
inflation may accelerate in China, curbing further stimulus. Tin also
dropped.
Copper for delivery in three months lost as much as 1.1
percent to $7,275.25 a metric ton on the London Metal Exchange
before trading at $7,345 as of 9:55 a.m. Shanghai time.
- Pimco Raises Treasuries Holdings to Highest Level Since 2010. Pacific Investment Management Co.’s
Bill Gross raised the holdings of Treasuries in his flagship
fund at to the highest level since July 2010 while warning that
investors face potential losses from central-bank policies. The proportion of U.S. government securities in the $292.9
billion Total Return Fund increased to 39 percent in April, from
33 percent in March, according to data on Newport Beach,
California-based Pimco’s website. Mortgage holdings rose to 34
percent, from 33 percent in March, which was the lowest level
since August 2011. The company doesn’t comment directly on
monthly changes in its portfolio holdings.
Wall Street Journal:
- ESPN Eyes Subsidizing Wireless-Data Plans. Smartphone users who binge on video, games and other content must
monitor their usage to ensure they don't run over monthly data caps that
wireless carriers have put in place in recent years.
Now, some media companies whose mobile
content gets a lot of traffic are considering arrangements with
wireless carriers that would ensure their users can watch, surf and play
as much as they want without being hit with stiff overage charges.
- Falling Deficit Alters Debate. Improving
Federal Finances Lessen Pressure on Democrats, Republicans to
Negotiate. Rising government revenue from tax collections and bailout
paybacks are
shrinking the federal deficit faster than expected, delaying the point
when the government will reach the so-called debt ceiling and altering
the budget debate in Washington.
- Hezbollah Says Syria to Supply Strategic Weapons.
Hezbollah's leader on Thursday said Syria will provide him with weapons
that will change the balance of power in his battle with Israel and
threatened to fight the Jewish state from inside Syria, ramping up
tensions after last week's Israeli airstrikes there.
Fox News:
- Republican leaders boycott controversial ObamaCare board. The Republican leaders of the House and Senate announced Thursday
that they will boycott the ObamaCare-created committee responsible for
holding down Medicare costs, in a challenge to a controversial element
of the health care overhaul. The Individual Payment Advisory Board, or IPAB, has been described as
a "death panel" by some of its fiercest critics. Though that epithet is
not often used anymore to describe the panel, Republicans still say it
would hurt seniors by forcing doctors to stop seeing patients.
CNBC:
- ‘Ridiculously Bearish for Miners’: Gartman. (video) The
move in the U.S. dollar bodes poorly for gold and worse for mining
companies, Dennis Gartman of The Gartman Letter said Thursday on CNBC.
"It broke out against every currency out there, even the Aussie, so
this is a dollar move, and a dollar move to this sort of strength cannot
be construed as being anything other than bearish for the metals
and ridiculously bearish for the miners," he said.
- Brent-WTI Oil Spread Collapse Spooks Refiners, Railways. The near $20 premium North Sea Brent held
for much of 2012 over U.S. benchmark West Texas Intermediate (WTI) has
fallen to less than $8 a barrel, the lowest since the crude-by-rail boom
began to gather steam in early 2011.
Zero Hedge:
Business Insider:
New York Times:
The Blaze:
Reuters:
- Huge cyber bank theft spans 27 countries. In one of the biggest
ever bank heists, a global cyber crime ring stole $45 million
from two Middle Eastern banks by hacking into credit card
processing firms and withdrawing money from ATMs in 27
countries, U.S. prosecutors said on Thursday. The U.S. Justice Department accused eight men of allegedly
forming the New York-based cell of the organization, and said
seven of them have been arrested. The eighth, allegedly a leader
of the cell, was reported to have been murdered in the Dominican
Republic on April 27.
- Brazil's big government seen as good for politics, bad for economy. President Dilma Rousseff added a
new minister to her Cabinet on Thursday, further enlarging a
federal government whose rapid growth since her leftist party
came to power a decade ago has increased Brazil's heavy tax
burden. Rousseff, who is seeking re-election next year, swore in
Guilherme Afif Domingos to head the newly created Ministry of
Micro and Small Businesses, the country's 39th ministry.
- JPMorgan(JPM) sued by California over 'illegal' debt collections. California's attorney general
sued JPMorgan Chase & Co on Thursday, accusing the
company of falsely signing documents to unlawfully collect
credit card debt from thousands of customers. The lawsuit accuses JPMorgan of engaging in widespread,
illegal "robo-signing" of legal documents to commit
debt-collection abuses against approximately 100,000 California
credit card borrowers.
- U.S. automakers urge congressional response to falling yen. U.S.
automakers
called on Congress to take action in response to the falling value of
the Japanese yen, which they said has hurt their exports and was a good
reason to keep Japan out of a proposed U.S.-led free trade pact.
"It's time for U.S. lawmakers to say they have had enough," American
Automotive Policy Council President Matt Blunt said in a statement on
Thursday, as the dollar rose to its highest value
in over four years, blasting through the 100-yen mark.
Telegraph:
Evening Recommendations
Janney Montgomery:
- Rated (DDD) Buy, target $56.
- Rated (SSYS) Buy, target $101.
- Rated (PRLB) Buy, target $60.
Night Trading
- Asian equity indices are -.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 100.5 +1.5 basis points.
- Asia Pacific Sovereign CDS Index 82.0 +1.5 basis points.
- NASDAQ 100 futures +.26%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
2:00 pm EST
- The Monthly Budget Statement for April is estimated at $110.0B versus $59.1B in March.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bernanke speaking, Fed's George speaking, Fed's Evans speaking, China Money Supply/New Loan data, USDA Crop Report, Canada Unemployment report, (SWFT) investor day and the (WY) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and financial shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- ISE Sentiment Index 99.0 -29.29%
- Total Put/Call 1.01 +16.09%
Credit Investor Angst:
- North American Investment Grade CDS Index 70.44 +2.06%
- European Financial Sector CDS Index 136.48 +2.56%
- Western Europe Sovereign Debt CDS Index 89.50 -2.07%
- Emerging Market CDS Index 230.71 -.56%
- 2-Year Swap Spread 13.5 -.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -14.75 +.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- China Import Iron Ore Spot $130.20/Metric Tonne unch.
- Citi US Economic Surprise Index -6.9 +1.0 point
- 10-Year TIPS Spread 2.30 +2 bps
Overseas Futures:
- Nikkei Futures: Indicating +375 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Higher: On gains in my retail/medical/biotech sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
