Wednesday, May 22, 2013

Bull Radar

Style Outperformer:
  • Large-Cap Value +.93%
Sector Outperformers:
  • 1) Homebuilders +2.61% 2) Gold & Silver +2.09% 3) Biotech +1.86%
Stocks Rising on Unusual Volume:
  • MNKD, INSM, BMY, PXD, NTAP, TNGO, NPSP, TOL, SPRD, ARIA, JAZZ and SCTY
Stocks With Unusual Call Option Activity:
  • 1) MNKD 2) SKS 3) NCT 4) MYL 5) HUN
Stocks With Most Positive News Mentions:
  • 1) MDT 2) FLO 3) KND 4) HD 5) NTAP
Charts:

Wednesday Watch

Evening Headlines 
Bloomberg: 
  • EU Panel Penalties to Hurt Solar Firms From China to U.K. The European Union is poised to penalize imports of Chinese solar products, a move that would increase Europe’s cost for most photovoltaic panels an estimated 45 percent overnight. While officials from the U.S., China and the EU have engaged in preliminary talks to settle a dispute over trade in solar-energy products, according to people familiar with the situation, the EU yesterday said it will stick to its June 6 deadline to decide whether to impose import duties. The EU proposal for tariffs would hurt manufacturers such as China’s Trina Solar Ltd. (TSL) and raise costs to build power plants in Europe, the world’s largest market for solar products and one largely supplied by Chinese manufacturers. Duties will trigger “an increase in prices that is a major concern for Chinese producers as well as developers in the region, who may find that many solar projects are no longer viable,” according to Jenny Chase, Bloomberg New Energy Finance’s chief solar analyst. “The proposed anti-dumping tariffs are higher than the industry expected.”  
  • Caisse de Depot to Sell European Properties Amid ‘Dark Night’. Caisse de Depot et Placement du Quebec is selling some of its European property and redeploying proceeds in assets such as infrastructure while the euro-area economy shrinks, Chief Executive Officer Michael Sabia said. About 20 percent of the Caisse’s C$18 billion ($17.5 billion) of real estate assets are in Western Europe, according to its 2012 annual report. “We are selling real estate assets in Europe,” Sabia said in an interview yesterday at the Bloomberg Canada Economic Summit in Toronto. “Real estate pricing among top quality, platinum-quality assets -- the pricing is quite good, and we are trying to benefit from that and in some other asset categories as well, where selectively asset prices are high.” “There’s a dark night going on in Europe, a dark and foggy night where bad things come out of trees and bite you,” Sabia said. “It’s a pretty scary place. In Europe there are investments to be made, and I think it’s possible to be successful there but there’s no place in the world, other that maybe emerging markets, where the word selectivity is fundamentally important.” Sabia didn’t specify which European properties the Caisse is planning to sell. 
  • BOJ Affirms Easing Plan After Biggest Jump in Yields in 5 Years. The Bank of Japan affirmed a plan to double the monetary base over two years after a jump in bond yields highlighted risks associated with Prime Minister Shinzo Abe’s campaign to revive the economy. The central bank will expand the supply of money in the economy by 60 to 70 trillion yen ($683 billion) a year, as pledged in April, the BOJ said in Tokyo today. Twenty-six of 27 economists in a Bloomberg News survey forecast no change in monetary policy.
  • Japan Exports Miss Estimates After Yen Slides to 4-Year Low. Japan’s exports missed estimates in April and the trade deficit swelled, highlighting weakness in global demand that may weigh on efforts to revive the world’s third-biggest economy. Overseas shipments rose 3.8 percent from a year earlier, the Finance Ministry said in Tokyo today. That was less than the median 5.4 percent estimate of 26 economists surveyed by Bloomberg News. The trade shortfall widened to 879.9 billion yen ($8.6 billion), the most for the month of April since at least 1979, according to the government. Exports to the European Union fell 3.5 percent from a year earlier, dropping for a 19th month, while those to the U.S. jumped 15 percent. Shipments to China rose 0.3 percent, indicating that demand may be stabilising after past declines
  • Australia Consumer Sentiment Slumps Most in 17 Months on Budget. Australian consumer confidence slumped by the most in 17 months as a government announcement the budget would remain in deficit overshadowed record low interest rates, a private survey showed. The sentiment index for May dropped 7 percent to 97.6, a Westpac Banking Corp. (WBC) and Melbourne Institute survey taken May 13-18 of 1,200 adults showed today in Sydney. That was the biggest drop since December 2011 and the first time since October 2012 the figure has fallen below 100, which indicates pessimists outnumber optimists.
  • Asia Stocks Rise to Five-Year High as BOJ Keeps Stimulus. Asian stocks rose, with the regional benchmark index trading at a five-year high, after the Bank of Japan maintained its plan to expand the monetary base. The MSCI Asia Pacific Index advanced 0.4 percent to 144.57 as of 12:08 p.m. in Tokyo. All 10 industry groups on the gauge climbed.
  • Subprime Mess Left by Pritzker Is Seen as Opening for Opponents. A 61-page report carrying the seal of the U.S. Treasury Department’s inspector general offers a tutorial for Republican senators interested in challenging Penny Pritzker’s commerce secretary nomination. The document chronicles the 2001 failure of a suburban Chicago bank after Pritzker and her family expanded subprime lending there and did pioneering work with the kind of mortgage-backed securitization that would eventually spread and help spark the worst recession since the Great Depression.
Wall Street Journal: 
  • Oklahoma Tornado: Long Minutes of Desperation Inside School Razed by Storm. When the tornado-warning sirens blared, Kelly Law was already in the hallway of Plaza Towers Elementary School, huddled against the wall, shielding as many students as she could with her body. Another eight or 10 teachers did the same, she said. For the long minutes it took the tornado to pass, she shut her eyes and prayed. The roof was ripped away. "It sounded like rivets being pulled out by a monster," Ms. Law said.
  • Investors Brave Loans That Fly Solo. The 40-story office tower at 120 Broadway, occupying a full city block just a stone's throw from Wall Street, looks much as it has since its completion in 1915. The market for loans on such commercial properties, by contrast, has changed in recent months and is booming for the first time since the financial crisis.
Fox News: 
  • Sources challenge White House claim of all-hands-on-deck pursuit of Benghazi suspects. U.S. military sources serving in North Africa are challenging the latest White House claim that the administration is applying "all the resources" at its disposal to bring the Benghazi attackers to justice, charging instead that the Obama administration knows who is responsible but is not acting. "They have let it slip by because of politics, and now we've taken all the correlation we had and dropped the ball because of risk (aversion) -- and now the security in Libya is more fragile than ever," one U.S. special operator told Fox News. The source, speaking on condition of anonymity, confirms that U.S. forces have tracked the alleged attackers since October but have since lost the trail of some of them, as no one up the chain of command would authorize them to capture or kill the targeted militia members.
CNBC:
  • Bernanke Expected to Deliver Dovish Message. Federal Reserve Chairman Ben Bernanke is expected to maintain his dovish tone when he speaks to Congress Wednesday, and he is likely to dispel any notion that the Fed is ready to cut back on its easing policy.
Zero Hedge: 
Business Insider: 
Fox19.com:
Reuters: 
  • Chemical-safety watchdog criticizes probe of Texas blast. Officials with the U.S. Chemical Safety Board say they may never know what caused last month's deadly fertilizer-plant explosion in Texas because of interference by federal and Texas agencies, according to a letter sent Tuesday by the head of the regulatory board to U.S. Senator Barbara Boxer.
Financial Times:
Telegraph:
Nikkei:
  • Amari Says It's Govt's Job to Avoid Volatility in Yieldds. Nikkei cites remarks made by Japanese Economy Minister Akira Amari to reporters in Tokyo.
National Business Daily:
  • Some Chinese Banks Stop Copper Trade Financing. Some Chinese banks have stopped issuing letters of credit, a type of trade financing, for copper importers after a government crackdown on hot-money inflows, citing bankers.
China Securities Journal:
  • China Should Expand Property Tax. Timing is "mature" for China to expand property tax trials, according to a commentary written by reporter Ren Xiao on the front page of China Securities Journal. A property tax will effectively relieve pressure on government's fiscal revenue, especially for local governments. It will be helpful to curb volatility of home prices, according to the commentary.
China Business News:
  • China Big Steel Companies Face Liability Pressure. China's 30 largest listed steel companies had current liabilities of 759.5b yuan as of 1Q, exceeding their current assets of 530.5b yuan, citing Sheng Zhicheng, deputy secretary general of steel and logistics committee at China Federation of Logistics & Purchasing.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 101.50 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 85.0 +.25 basis point.
  • FTSE-100 futures +.17%.
  • S&P 500 futures -.01%.
  • NASDAQ 100 futures +.01%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (SPLS)/.27
  • (LOW)/.51
  • (TOL)/.08
  • (ZLC)/.00
  • (TGT)/.84
  • (AEO)/.17
  • (EV)/.52
  • (HPQ)/.81
  • (SNPS)/.63
  • (LTD)/.46
  • (PETM)/.96
  • (GES)/.08     
Economic Releases
10:00 am EST
  • Existing Home Sales for April are estimated to rise to 4.99M versus 4.92M in March.
10:30 am EST
  • Bloomberg Consensus estimates call for a weekly crude oil inventory decline of -1,000,000 barrels versus a -624,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -300,000 barrels versus a +2,588,000 barrel gain the prior week. Distillate inventories are estimated to rise by +1,000,000 barrels versus a +2,300,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.5% versus a +1.0% gain the prior week.
2:00 pm EST
  • FOMC Minutes from April 30-May 1 Meeting.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Bernanke speaking, Fed's Fisher speaking, ECB's Draghi speaking, BoJ Decision, German 10Y debt auction, China HSBC Manufacturing PMI, weekly MBA mortgage applications report, (BA) investor conference and the (TMO) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by real estate and consumer staple shares in the region. I expect US stocks to open modestly higher and weaken into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.

Tuesday, May 21, 2013

Stocks Higher into Final Hour on Central Bank Hopes, Short-Covering, Biotech/Retail Sector Strength

Today's Market Take:

Broad Market Tone:
  • Advance/Decline Line: Slightly Higher
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • VIX 13.20 +1.38%
  • ISE Sentiment Index 171.0 +61.32%
  • Total Put/Call .85 +7.59%
  • NYSE Arms .96 +4.78%
Credit Investor Angst:
  • North American Investment Grade CDS Index 70.29 -1.0%
  • European Financial Sector CDS Index 131.49 +2.85%
  • Western Europe Sovereign Debt CDS Index 88.69 +2.72%
  • Emerging Market CDS Index 248.89 +.58%
  • 2-Year Swap Spread 14.75 +.25 bp
  • TED Spread 23.25 -1 bp
  • 3-Month EUR/USD Cross-Currency Basis Swap -15.0 +.5 bp
Economic Gauges:
  • 3-Month T-Bill Yield .04% +1 bp
  • Yield Curve 171.0 -1 bp
  • China Import Iron Ore Spot $123.60/Metric Tonne +.49%
  • Citi US Economic Surprise Index -18.70 -.5 point
  • 10-Year TIPS Spread 2.27 unch.
Overseas Futures:
  • Nikkei Futures: Indicating +145 open in Japan
  • DAX Futures: Indicating -8 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my retail/medical/biotech sector longs
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long

Today's Headlines

Bloomberg:
  • European Stocks Fall From 2008 High as Carnival Slides. European stocks retreated from the highest level in almost five years as Carnival Corp. led travel companies lower after cutting its forecasts. Carnival, the world’s largest cruise operator, slid 5.9 percent. Daimler AG declined 2.1 percent as a gauge of automakers fell from the highest close since 2007. Marks & Spencer Group Plc rallied 4.8 percent after saying it will reduce capital spending in an effort to boost profit margins. The Stoxx Europe 600 Index slipped 0.3 percent to 308.75 at 3:31 p.m. in London, as remarks by a Federal Reserve official fueled concern the central bank may reduce stimulus measures.
  • China Copper Imports Drop to 22-Month Low as Export Slump. Imports of refined copper by China, the biggest user, declined in April to the lowest level since June 2011, while exports fell for the first time in eight months. Inbound shipments were 183,023 metric tons last month, data from the General Administration of Customs showed today. That compared with 218,823 tons in March and 272,903 tons a year ago, according to data compiled by Bloomberg. Exports tumbled 52 percent to 29,072 tons from 60,642 tons a month earlier, the data showed.
  • Gold, Silver Fall on Bets Fed May Cut U.S. Bond Purchases. Gold and silver futures resumed slumps on speculation that the Federal Reserve may scale back U.S. debt purchases, curbing demand for the precious metals as a store of value. Fed Chairman Ben S. Bernanke will discuss the economic outlook in congressional testimony and the central bank will publish minutes of its latest meeting tomorrow. The bank buys $85 billion of Treasury and mortgage debt a month. The dollar advanced as much as 0.5 percent against a basket of currencies. Yesterday, gold gained 1.4 percent, snapping the longest skid in four years.
  • Oil-Fixing Probe Accelerates as EU Asks Traders for Help. The investigation into possible oil-price fixing gathered pace as trading houses from Glencore Xstrata Plc, the $70 billion mining firm, to Gunvor Group Ltd. were asked to provide information to European regulators. Glencore Xstrata, Gunvor and Vitol Group, which aren’t under investigation, along with other firms with offices in Switzerland, are assisting the European Commission with the inquiry, said three people familiar with the situation, who asked not to be identified because the matter is private. The commission announced last week that it’s probing whether oil companies colluded to distort prices.
  • S&P 500 May Reach 2,100, Goldman Sachs Says. Goldman Sachs Group Inc. said the U.S. stock-market rally may last at least another 2 1/2 years, sending the Standard & Poor’s 500 Index (SPX) up 26 percent to 2,100.
Wall Street Journal:
  • After Oklahoma Tornadoes, Rescue Efforts Focus on Survivors. At Least 24 Dead After Twisters Leave Trail of Chaos Across Oklahoma City Region. Search and rescue efforts continued Tuesday, after deadly tornadoes tore through towns just south of Oklahoma City on Monday, killing and injuring dozens and destroying numerous buildings, including more than one elementary school. Earlier reports on the death toll varied amid a chaotic scene, with the overnight estimate running as high as 51. But Amy Elliott, a spokeswoman for Oklahoma's Chief Medical Examiner, on Tuesday morning told the Associated Press: "We have got good news. The number right now is 24." Most of the 24 victims had been identified and were being returned to loved ones, she said. Authorities said the death toll was expected to rise.
Fox News:
CNBC:
  • Tim Cook: We Pay 'Every Single Dollar' in Taxes Owed. Apple's CEO is disputing assertions by a Senate panel that the company avoids billions of dollars in U.S. taxes by shifting profits to foreign affiliates.
  • Federal Execs to Get Millions Despite Cuts. Despite the sequester—huge cutbacks in federal spending that were mandated by law in March—some high-level Federal executives are scheduled to get millions of dollars in bonuses, unless there's a law to stop them. According to a report released Friday by the Senate Subcommittee on Financial and Contracting Oversight, the bonuses must be paid under current Congressional regulations, even with some $85 billion in government funding cuts in effect.
  • It's Back: Shadow Banking Hits Post-Crisis Highs. What Warren Buffett once called "financial weapons of mass destruction" are firing again, with securitization and shadow banking at post-financial crisis highs. The twin powers of bank funding that helped propel the nation into turmoil have regained ground swiftly, and analysts say it's both a challenge for regulators and a sign that the economy is recovering. Securitization, or the channels through which banks repackage loans and farm them off to investors, has hit volume of $225.6 billion by way of 365 deals this year, according to Dealogic.
Zero Hedge:
Business Insider:
Reuters:
  • Home Depot(HD) Reaps Housing Recovery's EffectsHome Depot reported higher-than-expected quarterly results and raised its sales and profit outlook for the year as the world's largest home improvement chain benefited from a nascent recovery in the U.S. housing market
  • Fed's Bullard: bond buying best policy when rates near zero. Massive asset purchases are the closest thing to normal monetary policy once interest rates get near zero, a senior U.S. Federal Reserve official said on Tuesday, recommending that the European Central Bank weigh such action if inflation falls further. St. Louis Federal Reserve Bank President James Bullard, a voting member of the Fed's policy-setting committee this year, also said the U.S. central bank should keep buying bonds, while adjusting the pace of purchases up or down, according to incoming economic data.
  • Euro rallies to session high against the dollar. The euro rose to a session high against the dollar on Tuesday as investors positioned ahead of testimony from U.S. Federal Reserve Chairman Ben Bernanke on Wednesday.
Financial Times:
  • Kyle Bass bets on full-blown Japan crisis. Kyle Bass hopes he is wrong, and so may everyone else, as the danger predicted by the founder of Dallas-based Hayman Capital is nothing less than a full blown financial crisis in the world’s third-largest economy, Japan.

Bear Radar

Style Underperformer:
  • Small-Cap Value +.11%
Sector Underperformers:
  • 1) Gold & Silver -1.85% 2) Homebuilders -1.30% 3) Airlines -1.07%
Stocks Falling on Unusual Volume:
  • MDCO, XNPT, NXST, FMX, TCPC, IGTE, HNP, HGG, CCL, SCTY, RKUS, UNXL, ALK, WWWW and WCG
Stocks With Unusual Put Option Activity:
  • 1) TIVO 2) BBY 3) MDT 4) JNK 5) EWW
Stocks With Most Negative News Mentions:
  • 1) BZH 2) WCG 3) CCL 4) PM 5) OSIS
Charts:

Bull Radar

Style Outperformer:
  • Large-Cap Growth +.08%
Sector Outperformers:
  • 1) Coal +1.86% 2) Alt Energy +.87% 3) Medical Equipment +.66%
Stocks Rising on Unusual Volume:
  • MDT, JASO, YY, MNRO, SKS, ABFS, KLIC and WLT
Stocks With Unusual Call Option Activity:
  • 1) AMTD 2) WMB 3) MDT 4) XRX 5) UUP
Stocks With Most Positive News Mentions:
  • 1) CBST 2) AET 3) MDT 4) TJX 5) NOC
Charts: