Style Underperformer:
Sector Underperformers:
- 1) REITs -1.94% 2) Gaming -1.82% 3) Steel -1.80%
Stocks Falling on Unusual Volume:
- EWJ, HK, INFN, KOS, HBC, PTR, ARRY, IRWD, PANL, DPS, LG, OAK, CRUS,
SMTC, NJ, JRS, FARO, WETF, BKE, OHI, AVB, MAIN, IFGL, CCK, HQL, YRCW, RJF, NOAH, BSMX, SRE, CEO, SSW, TM, GMCR, SSTK, O and OZM
Stocks With Unusual Put Option Activity:
- 1) SYMC 2) NAV 3) EWW 4) CRUS 5) DXJ
Stocks With Most Negative News Mentions:
- 1) SANM 2) DVN 3) CMA 4) GM 5) AA
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Computer Hardware +2.09% 2) Homebuilders +.78% 3) Hospitals +.29%
Stocks Rising on Unusual Volume:
- HPQ, LOGI, RUE, LPS, FNF, YY, PLCE, DOV, SCTY, VVUS, DLTR, WDAY and INFI
Stocks With Unusual Call Option Activity:
- 1) MNKD 2) ZIOP 3) HPQ 4) ZTS 5) P
Stocks With Most Positive News Mentions:
- 1) HOT 2) PAY 3) RL 4) DLTR 5) AAP
Charts:
Evening Headlines
Bloomberg:
- Spain’s Bad Bank Begins 15-Year Suicide With Bull Sale. Spain’s
Sareb, set up last year to acquire 90 billion euros ($116 billion) of
soured real estate assets at a discount from rescued lenders, is
preparing its
first sale, known as ‘Project Bull,’ to test the beleaguered
property market’s ability to attract investors.
- Nobel Laureate Phelps Warns Against EU as Iceland Abandons Talks. Nobel Laureate Edmund Phelps warned
against the dangers of European Union membership as Iceland
became the latest nation to question the sense of affiliation
with a bloc mired in economic crisis. Iceland’s new government said yesterday it will halt its
EU bid and drop the previous coalition’s goal of euro adoption.
Prime Minister-elect Sigmundur Gunnlaugsson, whose Progressives
won last month’s vote together with the Independence Party,
said he doesn’t want to join a bloc in crisis as his own economy
recovers. According to Phelps, the decision will spare Iceland
many of the risks plaguing the EU.
- JPMorgan(JPM) to Daiwa
See Rate Rise Amid Slower Growth: China Credit. Economists are
forecasting that the People's Bank of China is more likely to raise
interest rates than cut them in the coming year, even as they slash
growth projections for the world's second-largest economy. Eight of 15
analysts surveyed by Bloomberg News this month project an increase in
the benchmark deposit rate by the end of June 2014, compared with two
who see a reduction. The government "seems to have become more tolerant"
of weaker growth, UBS AG says, as Premier Li Keqiang grapples with
credit expansion and price gains seen approaching the official target.
The gap between two- and 10-year yields has narrowed to an 18-month low
of 38 basis points, suggesting the market is anticipating a slowdown
without stimulus. The similar gap in India, which is expanding at its
slowest pace in a decade, is 11 basis points.
- China
Rule Changes May Halt Copper-Financing Deals, Goldman(GS) Says. New
rules from China's State Administration of Foreign Exchange, effective
from June, are likely to end commodity-financing deals, Goldman says in
e-mailed report. An end to Chinese copper financing deals would be
bearish for prices, Goldman says. Goldman sees downside risks to
six-month $8,000/ton forecast, analysts say in report. Goldman unwinds
long September copper recommendation, according to report. The LME
market may need to "carry" as much as 250,000 tons of additional
physical copper over one to three months, Goldman says.
- Asian Stocks Drop on China PMI, Fed Stimulus Concerns.
Asian stocks declined, with the regional benchmark index heading for
its biggest drop in five weeks, after China’s manufacturing output
unexpectedly contracted and amid speculation the Federal Reserve may
soon wind back stimulus. Jiangxi Copper Co. (358), China’s biggest
producer of the metal, dropped 2.5 percent in Hong Kong. Westpac Banking
Corp. slipped 4.2 percent, leading Australian lenders lower. Fast
Retailing Co., a clothier that has nearly 11 percent weighting on the
Nikkei 225, gained 3.9 percent on speculation sales at Japanese
retailers will increase after a report showed foreign visitors
last month climbed almost a fifth. The MSCI Asia Pacific Index declined 1.1 percent to 141.87
as of 11:56 a.m. in Tokyo, heading for its biggest drop since
April 18. Almost four shares fell for each that rose on the
gauge.
- Rubber Declines Most in 3 Weeks as Drop in Oil Reduces Appeal. Rubber declined the most in three
weeks as a slump in oil reduced the appeal of the commodity as
an alternative to synthetic products used in tires. The contract for delivery in October lost as much as 2.7
percent, the most since May 2, to 282.5 a kilogram ($2,732 a metric ton). Futures traded at 283.8 yen on the Tokyo Commodity
Exchange at 10:28 a.m., extending losses for the most-active
contract to 6.2 percent this year.
- Copper Falls Most in a Week on China Manufacturing Contraction. Copper dropped the most in a week
along with other industrial metals after a report showed
manufacturing in China, the world’s biggest metals consumer, is
contracting for the first time in seven months. Copper for delivery in three months declined as much as 2.7
percent, the most since May 14, to $7,276.25 a metric ton on the London Metal Exchange and was at $7,310 at 11:47 a.m. in Seoul.
The contract for September delivery fell 1.7 percent to 52,690 ($8,617)
yuan a ton in Shanghai, while futures for July delivery
declined 2 percent to $3.3135 a pound on the Comex.
- Rebar Drops After China’s Manufacturing Unexpectedly Contracts.
Steel reinforcement-bar futures
declined after data showed an unexpected contraction in China’s
manufacturing this month, hurting the outlook for bulk commodities. Rebar
for delivery in October dropped as much as 1.2 percent to 3,551 yuan
($579) a metric ton on the Shanghai Futures Exchange and traded at 3,565
yuan at 10:49 a.m. local
time. The price has lost 11 percent this year.
- Syrian Army Advances Signal Assad May Survive for Years. Syria’s
President Bashar al-Assad, whose government was last year described as
close to collapse by groups ranging from the North Atlantic Treaty
Organization to the armed opposition, may remain in power for years to
come. “The regime is still in place, strong and not going anywhere,” Julien Barnes-Dacey, a senior policy fellow at the
European Council on Foreign Relations, said in an interview.
Widespread predictions of his demise reflected an
“unwillingness to assess the regime’s strength, wishful
thinking, a desire for a swift end, and a failure to recognize
this is a civil war.”
- Detroit ‘Crushing’ Debt Among First City Overhauls, Orr Says. Detroit’s bond payments are
“crushing” the city by hindering spending on public safety and
are among the first liabilities that need to be addressed,
emergency financial manager Kevyn Orr said. “The debt service that the city can’t bear is crushing it
under its weight,” Orr said at a luncheon in New York for the
bankruptcy and reorganization group of the UJA-Federation of New
York, a Jewish philanthropic organization. “First order of
business is to get a hold of our balance-sheet issues.”
Wall Street Journal:
- Fed Leaves Market Guessing. Bernanke Signals Cautious Tack on Bond Buying; Meeting Minutes Blur Picture. In a day of conflicting messages from the Federal Reserve that roiled
financial markets, Chairman Ben Bernanke left some straightforward new
clues about the central bank's plans for its $85 billion-a-month
bond-buying program.
The Fed could take a first step toward
reducing the program at one of its "next few meetings," Mr. Bernanke
said, but he cautioned that he was reluctant to move prematurely or
aggressively. The comments, given at a congressional hearing Wednesday, gave
markets a dose of clarity for a few hours, though a subsequent release
of minutes from the Fed's April 30-May 1 Fed policy meeting added to
investor anxiety about the Fed's plans. The minutes disclosed that some
officials were prepared to start pulling back the program as early as
the Fed's next meeting in June, though the group as a whole, too,
expressed hesitance.
- China Falls Short on Efforts to Rebalance. Beijing Continued to Spend in 2012, New Economic Details Show, Missing Promised Shift Toward Consumer-Driven Growth. A more detailed look at China's economic performance in 2012 shows it
tipped further off balance, relying more than ever on credit-fueled
investment, a trend it had tried to rein in.
A further tilt toward capital spending
flies in the face of Beijing's goals to shift to a consumption-driven
economic model and threatens to add to a mounting debt problem,
exacerbate industrial overcapacity that is dragging down profits, and
produce more empty "ghost cities."
China's economy also showed signs of losing momentum in May.
- Lamar Alexander: Kathleen Sebelius, Meet Oliver North. Is the Department of Health and Human Services engaged in a domestic Iran-Contra? Major news outlets in recent days have reported that U.S. Department of
Health and Human Services Secretary Kathleen Sebelius is raising money
from the private sector—including from health-care executives—for use by
a private entity that is helping to implement ObamaCare. The entity,
Enroll America, is run by a former White House aide.
Fox News:
- IRS official who refused to testify facing more scrutiny over scandal, past. The IRS official who refused to testify at a House hearing Wednesday
has become a key focus of the congressional investigations into the IRS
practice of singling out conservative groups. Now under the
protection of her lawyers and the Fifth Amendment, Lois Lerner is facing
a maelstrom of controversy. Members of Congress are calling her
evasive, and question why she
didn't reveal the program sooner -- plus her history at the Federal
Elections Commission is coming under scrutiny.
CNBC:
- Nikkei Skids 4% After Weak China PMI. Japan's Nikkei, together with the rest of regional stock indices, were
sharply lower on Thursday after a preliminary survey of China's
manufacturing sector raised alarm bells while fears grew that the U.S.
Federal Reserve may withdraw its bond buying sooner than expected. The
index was up 2 percent earlier in the day.
Zero Hedge:
Business Insider:
New York Times:
- Holder Letter on Counterterror Strikes Against U.S. Citizens. The day before President Obama’s
planned speech on drone policy, Attorney General Eric H. Holder Jr. wrote a
letter to members of Congress acknowledging the deaths of four Americans,
including Anwar al-Awlaki, in counterterrorism strikes
“outside of areas of active hostilities.” Though these strikes had long
been the subject of press reports about the administration’s use of
drones, the letter marks the first time the classified operations have been publicly acknowledged.
ABCNews:
- GOP Super PAC Takes Aim at McAuliffe, Car Company. The
group today posted online 688 pages of emails between Virginia Economic
Development Partnership officials and GreenTech Automotive, an electric
car company founded by
McAuliffe that sought to locate in Virginia in 2009.
MercuryNews.com:
Reuters:
- DryShips(DRYS) posts another loss, expects rates to remain weak. DryShips Inc, a drybulk shipper and offshore contract driller, posted a sixth straight quarterly loss and said it did not expect charter rates to improve this
year. Shares of DryShips, considered to be a bellwether stock for
the industry, fell as much as 7 percent in aftermarket trade.
Financial Times:
- London hedge funds ‘mapped’ by G8 protesters. A
number of London-based hedge funds including Man Group and Brevan
Howard have been targeted by an anti-capitalist group ahead of the G8
summit next month. The group, Stop G8, has drawn up an “action map” of what
they call the “hiding places of power in the West End”, which highlights
potential targets for protesters.
Telegraph:
- BRICS risk 'sudden stop' as dollar rally builds. The
stock of capital flowing into emerging markets has doubled from $4
trillion to $8 trillion since the Lehman Crisis, chasing a catch-up
growth story that looks tired and has largely sputtered out in Brazil,
Russia and South Africa.
Financial Review:
- Ford(F) to pull out of Australian manufacturing. Ford has announced it will close its manufacturing operations in
Broadmeadows and Geelong in October 2016, with the loss of 1200 jobs. Ford Australia president Bob Graziano announced the closure on
Thursday after Ford recorded a $141 million after-tax loss for 2012 and
losses of almost $600 million over five years. He cited the high cost of doing business in Australia, which was larger than that in Asia and Europe. “The business case did not stack up,’’ he said.
Shanghai Securities News:
- China Air Pollution Curb Plan to Be Submitted. A national air
pollution prevention and control plan may be submitted to China's State
Council in near-term, citing Yang Tiesheng, an official at the Ministry
of Industry and Information Technology.
China Securities Journal:
- China Evaluates Result of Property Curbs. Chinese policy makers
are evaluating result of current property curbs and may adjust policies,
citing a recent meeting of the real estate industry. China may expand
property tax trials to several new cities this year, China Securities
Journal reported May 20th.
Quartz:
- Investors just gave Galaxy Securities $1 billion to make China’s bad debt problem worse.
China Galaxy Securities Co., which is majority owned by one of China’s
sovereign wealth funds, raised $1.07 billion in its Hong Kong IPO
today—capital that will go toward building up its margin financing and
securities lending businesses, its core money-spinners. Many are
hailing the event as a revival of Hong Kong’s moribund IPO market, and
that may be. But Galaxy’s prospectus tells another story too:
Over-regulation of China’s stock market is warping incentives for its
brokerages.
Evening Recommendations
Night Trading
- Asian equity indices are -2.0% to -.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.0 +1.5 basis points.
- Asia Pacific Sovereign CDS Index 87.0 +2.0 basis points.
- NASDAQ 100 futures -.33%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 345K versus 360K the prior week.
- Continuing Claims are estimated to fall to 3000K versus 3009K prior.
8:58 am EST
- Preliminary Markit US PMI for May is estimated to rise to 51.2 versus 52.1 in April.
9:00 am EST
- The House Price Index for March is estimated to rise +.8% versus a +.7% gain in April.
10:00 am EST
- New Home Sales for April are estimated to rise to 425K versus 417K in March.
11:00 am EST
- Kansas City Fed Manufacturing for May is estimated to rise to -4 from -5 in April.
Upcoming Splits
Other Potential Market Movers
- The Fed's Bullard speaking, Spanish 10Y auction, Eurozone Services PMI, UK GDP/Retail Sales reports, 10Y TIPS auction, China Business Sentiment Index, BoJ's Kuroda speaking, weekly EIA natural gas inventory report and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by financial and commodity shares in the region. I expect US stocks to open modestly lower and maintain looses into the afternoon. The Portfolio is 50% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- ISE Sentiment Index 110.0 -22.54%
- Total Put/Call .96 +3.23%
Credit Investor Angst:
- North American Investment Grade CDS Index 71.82 +2.62%
- European Financial Sector CDS Index 126.06 -4.1%
- Western Europe Sovereign Debt CDS Index 77.46 -12.7%
- Emerging Market CDS Index 248.91 +.33%
- 2-Year Swap Spread 14.75 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -15.25 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- China Import Iron Ore Spot $123.20/Metric Tonne -.32%
- Citi US Economic Surprise Index -19.40 -.7 point
- 10-Year TIPS Spread 2.26 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating +8 open in Japan
- DAX Futures: Indicating -74 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/medical/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Iceland Freezes EU Plans as Government Shuns Euro Crisis. Iceland’s new government is turning
its back on the European Union and will shelve accession talks
that started in 2010 as the nation seeks to protect its economic
recovery from the debt crisis. Sigmundur David Gunnlaugsson, who will take over as prime
minister this week, has decided that a January decision to
freeze EU membership talks will be extended indefinitely, his
political adviser Johannes Thor Skulason said in a phone
interview today.
- Oil-Tanker Crews Seen Quitting on 40-Year High in Losses. Oil-tanker owners will struggle to
retain crews and maintain ships after losing the most money in
four decades, according to the industry’s biggest trade group. The problems won’t ease any time soon because some vessel
rates may take as long as four years to rebound, said Katharina Stanzel, the managing director of the International Association
of Independent Tanker Owners, or Intertanko. Its members operate
more than half of the world’s tankers by capacity.
- Iron Ore Seen Extending Decline as China Steel Mills Shut Down. Iron
ore will fall another 8 percent in the next several months as steel
mills in China, the biggest importer, shut down because of maintenance,
power rationing and squeezed profits, according to Deutsche Bank AG.
Prices may fall about $10 a dry metric ton in the next couple of
months, analysts led by Xiao Fu and Daniel Brebner said in an e-mailed
report today. Ore with 62 percent iron content at the port of Tianjin, a
global benchmark, tumbled 22
percent to $123.60 a ton from a 16-month high on Feb. 20,
according to The Steel Index Ltd.
- WTI Crude Falls on Smaller-Than-Expected Inventory Drop. West Texas Intermediate oil fell as a
government report showed U.S. gasoline supplies unexpectedly
gained and crude stockpiles at Cushing, Oklahoma, the delivery
point for the contract, increased for a second week.
Futures dropped as much as 1.9 percent after the Energy
Information Administration said gasoline inventories advanced
3.02 million barrels to 220.7 million.
- Iran Raises Uranium Output and Installs More Advanced Machines. Iran lifted its output of uranium,
the heavy metal at the center of the Islamic Republic’s clash
with the United Nations, according to inspectors, who also
reported that the Persian Gulf country continued upgrading the
machines it’s using to purify the material.
- IRS Official Lerner Refuses to Testify at Issa Hearing. Lois Lerner, the mid-level Internal Revenue Service official at the
center of a controversy over treatment of small-government groups,
invoked her right not to testify after reading a statement denying that
she had committed any crimes. “I am very proud of the work that I
have done in government,” she said today, reading a statement at the
House Oversight and Government Reform Committee hearing. “I have not
done anything wrong. I have not broken any laws.”
Fox News:
CNBC:
- Fed Minutes: Members Mull Tapering as Soon as June. "A number of participants" on the U.S. Federal Reserve's Federal Open Markets Committee this month favored slowing the Fed's
efforts to maintain record-low long-term interest rates as early as
summer — if the economy showed strong and sustained growth.
Zero Hedge:
Business Insider:
Bespoke Investment Group:
Pragmatic Capitalism:
Reuters:
- Target(TGT) cuts full-year forecast after weak first quarter. Target Corp
(TGT.N) cut its full-year profit forecast on Wednesday while turning in
a weak first quarter with disappointing sales, as a chilly start to
spring kept shoppers from buying seasonal items like clothing.
Target warned in April its
first-quarter results would be weaker than anticipated, and its
performance was even worse than revised Wall Street expectations due to
the cool weather and the impact of higher payroll taxes on spending. Shares of Target fell 3.6 percent to $68.70.
@RonnieSpence:
Telegraph:
Irish Times:
Spiegel:
- Assad
Is Stronger Than Before, Germany Spy Chief Says. Army of Syria's Assad
is currently stronger than for long time, BND intelligence chief Gerhard
Schindler told lawmakers. Expects army to regain control of Syria's
south by yr end. Says rebels are in precarious situation.
Style Underperformer:
Sector Underperformers:
- 1) Oil Tankers -2.12% 2) Education -2.05% 3) REITs -.90%
Stocks Falling on Unusual Volume:
- TKC, FMX, PBR, AMAG, INFI, OFG, PVTB, HBC, UBS, UAN, IRWD, SWI, ST, YY, CTRX, HNP, MDCO, SSTK, ARRS, TGT, BABY, AMAG, GIVN, PCLN, ECT, TPX, INFI, CRH, GME, OPEN, ARE, ESI, SYT and IGTE
Stocks With Unusual Put Option Activity:
- 1) IYR 2) SPLS 3) TGT 4) STZ 5) AXP
Stocks With Most Negative News Mentions:
- 1) FCX 2) CCL 3) LRCX 4) PM 5) OSIS
Charts:
