Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -3.60% 2) REITs -.85% 3) Steel -.81%
Stocks Falling on Unusual Volume:
- IRM, TIVO, EQIX, LAMR, TMO, CPRT, SHOS, OIS, BOFI, CHMT, LQDT, WLT, ARMH, USM, QCOM, DLR, NX, HME, CLP, ZTS, AMT, LYB, AEM and SYNA
Stocks With Unusual Put Option Activity:
- 1) LYV 2) IRM 3) BID 4) IYT 5) YUM
Stocks With Most Negative News Mentions:
- 1) RYL 2) KBH 3) SLV 4) ANR 5) VNQ
Charts:
Style Outperformer:
Sector Outperformers:
- Restaurants +1.85% 2) Biotech +1.68% 3) HMOs +1.66%
Stocks Rising on Unusual Volume:
- CA, NRG, ELN, THO, GME, UNXL, PPC and QCOR
Stocks With Unusual Call Option Activity:
- 1) CA 2) HRB 3) CTRX 4) TIVO 5) KKD
Stocks With Most Positive News Mentions:
- 1) PSMT 2) LMT 3) VRA 4) VALE 5) GPS
Charts:
Evening Headlines
Bloomberg:
- Aso Says Japan Won’t Intervene After Biggest Yen Gain in 3 Years. Japanese Finance Minister Taro Aso
said that the government won’t intervene in the currency market
for now after the yen strengthened by the most in three years
against the dollar. “We are carefully watching, but we don’t have any
immediate intention of taking any action, such as
intervention,” the finance minister told reporters in Tokyo
today, when asked to respond to the currency’s surge. The yen
traded unchanged for today at 96.97 per dollar as of 10:38 a.m.
in Tokyo. Japan’s currency jumped 2.2 percent yesterday, adding to
the headwinds of a slide in stocks and volatility in bonds as
Prime Minister Shinzo Abe campaigns to revive the world’s third-biggest economy. As attention turns to a Bank of Japan meeting
on June 10-11, Governor Haruhiko Kuroda’s actions may be limited
by his pledge to avoid “incremental” steps after announcing a
plan to double the monetary base over two years.
- Bearish
Bets on Emerging-Market Bond ETF Surge to Record on Fed. Investors are
the most bearish ever on the largest exchange traded fun for
emerging-market bonds as concern the Federal Reserve will reduce
stimulus prompts investors to dump debt from developing nations. Short
interest, a measure of shares borrowed and sold on speculation they will
fall, on the iShares JPMorgan USD Emerging Markets Bond Fund surged to
8.5 million on June 5, according to data compiled by London-based Markit
Group Ltd. That's up from 1.9 million on Dec. 31 and is equivalent to
18% of the outstanding shares, the data showed. JPMorgan's EMBI Global
Index for dollar-denominated bonds fell 4.9% over the past month, the
most since 2008, as anti-government protests in Turkey, mining strikes
in South Africa and slower growth in China hurt investor confidence.
- Asian Stocks Drop as Yen Surge Weighs on Japanese Shares. Asian equities fell, with the regional benchmark index poised for the largest weekly drop in a year, as the yen’s biggest surge in three years weighed on Japanese shares and investors awaited a U.S. jobs report. Japan’s Topix index slid 2.2 percent with all but one of the 33 industry groups on the gauge falling. Newcrest Mining Ltd. slumped 8.1 percent as Australia’s biggest gold producer said it will write down the value of its mines by as much as A$6 billion ($5.7 billion). Honda Motor Co., a Japanese carmaker that gets 47 percent of its revenue in North America, dropped 3.9 percent. Texhong Textile Group Ltd. (2678) surged 11 percent toward a record in Hong Kong after the fabric maker said earnings may jump. The MSCI Asia Pacific Index fell 0.3 percent to 130.87 at 12:01 p.m. in Tokyo, with two stocks declining for each that
rose on the gauge.
- Rebar Trades Near Lowest in Nine Months Ahead of China Holiday.
Steel reinforcement-bar futures in Shanghai traded near the lowest
level in nine months as the price of iron ore fell and investors
continued to reduce positions in the last trading day before a holiday. Rebar for delivery in October on the Shanghai Futures
Exchange fell as much as 0.6 percent to 3,402 yuan ($555) a
metric ton, the lowest level for a most-active contract since
Sept. 7, and was at 3,417 yuan at 10:53 a.m. Futures are little
changed this week after falling for the past three weeks.
- Rubber Falls to Seven-Week Low on Strong Yen, Demand Concerns. Rubber declined for a third day to a
seven-week low as a strengthening Japanese currency reduced the
appeal of yen-denominated contracts and on concern that slowing
economies will cut demand. The contract for delivery in November on the Tokyo
Commodity Exchange fell as much as 1.7 percent to 243.6 yen a
kilogram ($2,514 a metric ton), the lowest level since April 18.
Futures extended losses for this year to 19 percent.
- Swings Suppressed as World Volatility Reveals No Panic. Price swings across assets and around the world are holding below historical averages even as central banks roil markets. Levels
of investor concern in equities, commodities, bonds and currencies as
measured by Bank of America Corp.’s Market Risk index of cross-asset
volatility are below readings from about 75 percent of days since 2000,
according to data compiled by Bloomberg. Among those markets, the cost
of options has risen in Treasuries and foreign exchange in 2013 and
fallen in stocks and raw materials.
- Jumbo Severance Packages for Top CEOs Are Growing. Corporate governance advocates and shareholder activists have long
complained that chief executive officer pay, which has jumped by a third
since 2007, is sometimes way out of line with a top executive’s
on-the-job performance. Severance packages for executives fired by their
boards are often far bigger than those corner-office salaries. At least
a dozen executives of companies in the Standard & Poor’s 500-stock
index stand to receive more than $100 million if they’re dismissed,
according to a Bloomberg review of proxy data.
Wall Street Journal:
- Austerity Isn't Europe's Only Burden. Arguments continue in Europe over whether governments should relax
budgets to encourage growth. But some analysts argue this debate is
drawing attention from something more important that is generating
serious headwinds for the region's economies: Europe's broken financial
sector. António Borges, a former European director of the International
Monetary Fund who is now at the Católica Lisbon School of Business and
Economics, says arguing about austerity misses the point. In most of Europe, he says, governments have no scope for
expansionary budgets because there is no market appetite for more of
their debt.
- Junk Bond Funds See Record $4.6 Billion of Outflows - Lipper. Bond funds saw waves of outflows in the week ended Wednesday, with
funds dedicated to low-grade, or "junk," debt seeing record withdrawals,
according to fund tracker Lipper. As much as $4.63 billion was pulled from mutual funds and
exchange-traded funds dedicated to junk bonds, the data provider said
late Thursday, compared with $875 million in outflows the prior week. That reading contributed to what was the second largest weekly outflow
on record for taxable bond funds overall, at $9.1 billion.
- Criminal Cases Loom in Rate Rigging.
U.S. and British authorities are preparing to bring criminal charges
against former employees of Barclays Plc for their alleged roles trying
to manipulate benchmark interest rates, according to people familiar
with the plans, marking an
escalation of a global investigation now entering its sixth year.
- In Qusayr, Signs of Holy War.
A day after it fell to forces loyal to President Bashar al-Assad, the
remains of this onetime Syrian rebel stronghold spoke of a battle as
deep in sectarian wrath as it was in destructive power.
- An IRS Political Timeline. President Obama spent months in 2010 warning
Americans about the 'threat' to democracy posed by conservative groups,
right at the time the IRS began targeting these groups.
Fox News:
- New York Times editorial board says administration has 'lost all credibility'. The New York Times editorial board, which twice endorsed President
Obama and has championed many planks of his agenda, on Thursday turned
on the president over the government's mass collection of phone data --
saying the administration has "lost all credibility." The grey lady's editorial section lately has shown frustration with
the administration's civil liberties record. It has criticized the
escalation of the lethal drone program, and it lashed out after the
Justice Department acknowledged seizing reporters' phone records last
month. The report that the National Security Agency has been collecting
phone records from millions of Verizon subscribers appeared to be the
last straw.
CNBC:
- Dollar-Yen Shake-Out Could Just Be the Start. A
day after the U.S. dollar suffered its largest one-day fall in three
years against the yen, strategists say the wild currency moves may be
far
from over and much is dependent on Friday's key U.S. jobs report.
Zero Hedge:
Business Insider:
Washington Post:
- Documents: U.S. mining data from 9 leading Internet firms; companies deny knowledge. The
National Security Agency and the FBI are tapping directly into
the central servers of nine leading U.S. Internet companies, extracting
audio and video chats, photographs, e-mails, documents, and connection
logs that enable analysts to track one target or trace a whole network
of associates, according to a top-secret document obtained by The
Washington Post. The program, code-named PRISM, has not been made public until
now. It may be the first of its kind. The NSA prides itself on stealing
secrets and breaking codes, and it is accustomed to corporate
partnerships that help it divert data traffic or sidestep barriers. But
there has never been a Google or Facebook before, and it is unlikely
that there are richer troves of valuable intelligence than the ones in
Silicon Valley. Equally unusual is the way the NSA extracts what it wants, according to
the document: “Collection directly from the servers of these U.S.
Service Providers: Microsoft, Yahoo, Google, Facebook, PalTalk, AOL,
Skype, YouTube, Apple.”
New York Times:
NBCNews.com:
The Blaze:
Reuters:
- U.S. quietly allows military aid to Egypt despite rights concerns. Secretary
of State John Kerry quietly acted last month to give Egypt $1.3 billion
in U.S. military aid, deciding that this was in the national interest
despite Egypt's failure to meet democracy standards. Kerry made the decision well
before an Egyptian court this week convicted 43 democracy workers,
including 16 Americans, in what the United States regards as a
politically motivated case against pro-democracy non-governmental
organizations. Rights groups
believe Egyptian President Mohamed Mursi is retreating from democratic
freedoms, notably in a new civil society law and in proposals for
judicial reform that critics see as a way to purge judges perceived as
hostile to the government.
- S&P takes negative outlook on Brazil due to slow growth. Standard &
Poor's revised its outlook on long-term ratings for Brazil's sovereign
debt to negative from stable on Thursday, citing deteriorating fiscal
fundamentals and slow economic growth under left-leaning President Dilma
Rousseff.
The darker outlook was the
latest blow to Latin America's largest economy, which has also seen its
currency battered and economic growth data fall short of expectations in
the last few weeks as investors lose faith in what just two years ago
was considered an overwhelming success story. The
ratings agency affirmed its BBB long-term and A2 short-term ratings,
but said the negative outlook reflects the at least one-in-three
probability of a downgrade of Brazil over the next two years. "Continued
slow economic growth, weaker fiscal and external fundamentals, and some
loss in the credibility of economic policy given ambiguous policy
signals could diminish Brazil's ability to manage an external shock,"
S&P said.
- Internet giants deny granting government 'direct access' to servers. Major tech companies
including Apple Inc, Google and Facebook Inc on Thursday said
they do not provide any government agency with "direct access" to their
servers, contradicting a Washington Post report that they have granted such access under
a classified data collection program.
- In commodity pricing, silence and secrecy not limited to oil. A
major European probe into
the manipulation of global oil prices has raised concerns that could
equally resonate across opaque cash markets for a host of raw materials
ranging from iron ore to fertilizer. Benchmarks established by
journalists assessing the value of commodities are not unique to oil,
and are used in markets for many raw materials to price cash contracts
worth billions of dollars a day globally. Producers, consumers and
middlemen in those markets seek
prices favourable to their business, and have leeway to be
selective about what they reveal to the reporters assessing
trade and prices. Cash commodity markets are subject to little regulation, and
companies are not required by law to disclose every trade they
execute in the often illiquid markets.
- Bank holdings of U.S. municipal bonds hit record high. The banking sector is
becoming a greater force in the U.S. municipal bond market, with
Federal Reserve data on Thursday showing that banks' holdings of
municipal bonds reached a record $374.2 billion in the first
quarter of 2013.
- U.S. Fed balance sheet grows in latest week. The U.S. Federal Reserve's
balance sheet grew in the latest week on larger holdings of U.S.
Treasuries, Fed data released on Thursday showed.
The Fed's balance sheet, which is a broad gauge of its
lending to the financial system, stood at $3.357 trillion on
June 5, compared to $3.342 trillion on May 29.
Financial Times:
- Yen’s rebound poses currencies headache.
It looked like the world’s easiest trade. Hedge funds made billions on
it. Some investors made 30 per cent in a matter of months. Yet selling
Japan’s currency has lately become a headache. Just two weeks after the
yen hit its weakest level against the dollar since the collapse of
Lehman Brothers in 2008, the dollar-yen trade is under attack.
“Abenomics” has left investors underwhelmed. Prime minister Shinzo Abe’s
much anticipated economic reforms – dubbed the “third arrow” in
addition to stimulus spending and looser monetary policy – have
disappointed the financial markets this week, amplifying swings in
Japanese equities and bonds. The result has been a stronger yen.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -1.50% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 128.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 104.5 +.75 basis point.
- NASDAQ 100 futures -.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Change in Non-farm Payrolls for May is estimated to rise to 165K versus 163K in April.
- The Unemployment Rate for May is estimated at 7.5% versus 7.5% in April.
- Average Hourly Earnings for May are estimated to rise +.2% versus a +.2% gain in April.
3:00 pm EST
- Consumer Credit for April is estimated to rise to $12.9B versus $7.96B in March.
Upcoming Splits
Other Potential Market Movers
- The Eurozone trade data could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and financial shares in the region. I expect US stocks to open mixesd and weaken into the afternoon, finishing modestly lower. 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: Outperforming
Equity Investor Angst:
- ISE Sentiment Index 97.0 +59.0%
- Total Put/Call 1.23 +4.24%
Credit Investor Angst:
- North American Investment Grade CDS Index 84.20 -2.08%
- European Financial Sector CDS Index 164.60 +5.1%
- Western Europe Sovereign Debt CDS Index 84.50 +1.20%
- Emerging Market CDS Index 308.31 +3.10%
- 2-Year Swap Spread 17.25 +.25 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -12.75 +.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $113.90/Metric Tonne -2.32%
- Citi US Economic Surprise Index -29.0 unch.
- 10-Year TIPS Spread 2.13 -3 bps
Overseas Futures:
- Nikkei Futures: Indicating -214 open in Japan
- DAX Futures: Indicating +38 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/medical/retail/tech sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Draghi Sees Economy Recovering as ECB Rates Left on Hold.
European Central Bank President Mario Draghi said the euro-area economy
will return to growth by the end of the year, handing policy makers a
reason to hold back fresh stimulus. “Euro-area economic activity
should stabilize and recover in the course of the year, albeit at a
subdued pace,” Draghi told reporters in Frankfurt today. “We will
monitor very closely all incoming developments and we stand ready to
act.”
- German Factory Orders Fall; Economy Struggles to Recover. German factory
orders (GRIORTMM) fell more than economists predicted in April as
Europe’s largest economy struggled to gain strength. Orders, adjusted
for seasonal swings and inflation, decreased 2.3 percent from March,
when they increased a revised 2.3 percent, the Economy Ministry in
Berlin said today. Economists forecast a 1 percent drop, according to the median of 39 estimates in a Bloomberg News survey. In the year, workday-adjusted orders fell 0.4 percent.
- Turkish Bonds, Stocks Slump as Erdogan Fails to Calm Investors. Turkish bond yields surged and stocks
slumped after Prime Minister Recep Tayyip Erdogan failed to calm
investor concern as anti-government protesters demonstrated for
the seventh day. The lira depreciated. Yields on two-year benchmark bonds advanced 46 basis points
to 6.78 percent at 5:48 p.m. in Istanbul, extending the weekly jump to 71 basis points. The Borsa Istanbul National 100 (XU100) index retreated 4.7 percent to 75,895.26 at the close, its lowest level since Dec. 6. The lira weakened 0.3 percent to 1.8986 a
dollar, after earlier strengthening as much as 0.6 percent.
- European Stocks Decline After Draghi Comments on Stimulus.
European stocks declined, reversing earlier gains, as the European
Central Bank refrained from announcing additional stimulus measures
immediately even as it held its benchmark interest rate. Barclays Plc
(BARC) fell to a one-month low as Sumitomo Mitsui Banking Corp. sold a
stake in the lender. Fiat SpA lost 6.5 percent as Chrysler Group LLC
went in for a vehicle recall. France Telecom SA (FTE) rose after its
Orange Business Services unit won a five-year deal to deploy a private
network for Heineken NV. Johnson Matthey Plc (JMAT) jumped to its
highest price in at least
23 years after posting full-year profit that beat estimates. The Stoxx 600 dropped 1.2 percent to 291.69 at the close of
trading in London, after earlier gaining as much as 0.4 percent.
- Japanese Stock-Index Futures Drop, Signaling Third Day of Losses. Japanese equity futures fell,
signaling a third day of losses for the Nikkei 225 Stock
Average, on concern the yen’s rally to a seven-week high versus
the dollar will hurt corporate profits. Futures on the Nikkei 225 expiring in June slumped 3.1
percent to 12,420 as of 1:52 a.m. in Osaka. The Japanese equity
benchmark has fallen 4.7 percent in the past two days, extending
a retreat since May 23 to 17 percent. The yen strengthened 2.6
percent to 96.49 per dollar today.
- Yen Rises Most in One Year as Traders Reverse BOJ-Linked Bets. The yen rallied the most in more than
a year against the dollar, reaching a seven-week high, as
traders unwound bets on a weaker Japanese currency based on the
Bank of Japan’s monetary stimulus plan.
- Credit Swaps in U.S. Rise as Investors Search for Stimulus Clues. A
gauge of U.S. corporate credit risk
rose to a two-month high as investors sought clues in labor-market data
about the pace of central bank debt purchases. The Markit CDX North
American Investment Grade Index, a
credit-default swaps benchmark that investors use to hedge
against losses or to speculate on creditworthiness, rose 1.9
basis points to a mid-price of 87.9 basis points at 11:07 a.m. in New
York, according to prices compiled by Bloomberg. The gauge had
fallen as much as 1.2 basis points before weekly jobless claims data
came in higher than economists’ forecasts and the previous week’s level
was revised upward. The risk premium on the Markit CDX North American
High
Yield Index added 12.8 basis points to 440.7 basis points,
Bloomberg prices show. The average relative yield on speculative-grade,
or junk-rated, debt widened 5.1 basis points to 546.9 basis points,
Bloomberg data show.
- Higher Taxes Mute Wealth Effect for Wealthy: EcoPulse. High-income Americans are
demonstrating some frugality as the positive wealth effect from
a rallying stock market is being offset by tax increases.
- JPMorgan ‘Afraid’ of Emerging Market Selloff Impact on Banks.
The emerging market selloff sparked by speculation the
Federal Reserve will reduce stimulus may cut revenue for investment
banks including Standard Chartered Plc and HSBC Holdings Plc, JPMorgan
Chase & Co.’s Cazenove said. Emerging markets are going through
the most disruptive period since the collapse of Lehman Brothers
Holdings Inc. in 2008 based on the rise in equity, currency and rates
volatility, according to the JPMorgan unit’s report titled “Fed Tapering: Who is Afraid of EM Selloff? We Are!” The swings may cause
a “material slowdown” in emerging market fixed-income revenues with
volumes “drying up,” Cazenove analysts including Kian Abouhossein in
London wrote.
- Dimon Sees ‘Scary’ World as Interest Rates Return to Normal.
Global markets will face increased volatility as central banks bring
interest rates back to normal levels, JPMorgan Chase & Co. (JPM)
Chief Executive Officer Jamie Dimon said. “We should all hope for a
normalization of interest rates -- that’s a good thing,” Dimon said
today during a panel discussion at the Fortune Global Forum in Chengdu,
China. “As
we go back to normal, it's going to be scary, and it's going to
be kind of volatile.”
- Goldman Sees Bull Run Over as Returns Trail Stocks: Commodities. Commodities
are trailing equities for
the longest stretch in almost 15 years as Goldman Sachs Group Inc. and
Citigroup Inc. predict the end of the decade-long bull market even as
the global economy expands. The Standard & Poor’s GSCI Spot
Index of 24 commodities lagged behind the MSCI All-Country World Index
for six months, the longest stretch since 1998. Hedge funds cut combined bullish bets across 18 U.S. raw-material futures by 51 percent from a
16-month high in September and are bearish on six of them.
Commodities will return 1.6 percent in a year as losses in
agriculture and precious metals diminish gains from energy and
industrial metals, Goldman said last month. Investors pulled a record $23.3 billion from commodity
funds this year as global equities attracted $182 billion,
according to EPFR Global, which tracks money flows.
- Copper Heads for Biggest Loss in Two Weeks on Demand Concerns. Copper
headed for the biggest loss in two weeks in New York as signs of
slowing in China and Germany add to concerns that global economic growth
will ebb, dimming the outlook for metals demand. German factory
orders slid more than forecast in April, figures showed today. Export
growth in China, the biggest copper
consumer, probably grew in May at half the pace of a month earlier,
economists said in a Bloomberg survey before data due June 8. RBC
Capital Markets cut its 2013 forecast for copper prices by 9.3 percent.
“Poor global economic growth prospects are weighing” on metals, H.
Fraser Phillips, a Toronto-based analyst at RBC, said
in a note today. “Significant excess inventories have
accumulated, and capacity utilization rates are well below full
effect levels, pointing to a poor commodity pricing
environment.”
- U.S. Household Worth Tops Pre-Recession Peak for First Time. Household wealth in the U.S. jumped
to a record in the first quarter, exceeding its pre-recession
peak for the first time, bolstered by gains in the stock and
housing markets that are helping Americans mend finances.
Zero Hedge:
Business Insider:
4-Traders:
- Fed's Plosser Says Time to Ramp Down on Stimulus. "I think it's time that we begin to gradually unwind ourselves from this
activity," said Mr. Plosser, who is a vocal internal critic of the
Fed's stimulus efforts. He spoke with reporters following an address
during a Boston College financial conference.
LA Times:
Forbes:
Reuters:
- Moody's cuts Illinois credit rating on inability to fix pensions. Moody's
Investors Service on Thursday downgraded Illinois' general obligation
credit rating to the lowest rating in the state's history, the second
downgrade by a major rating agency since state lawmakers last week
failed to pass a plan to deal with a $100 billion unfunded public
pension liability. Moody's downgraded Illinois' $27 billion of general
obligation debt to A3 from A2, with a negative outlook. Even
prior to the downgrade, Illinois had the lowest rating of any
U.S. state.
Financial Times:
- ‘Frankenstein’ CDOs twitch back to life. Has
Frankenstein returned? That is a question some investors might ask when
they look at the world of collateralised debt obligations. After all, a
mere three years ago it seemed as if the really monstrous forms of CDOs
that proliferated during the credit bubble had been killed off. Most
notably, issuance of so-called synthetic CDOs – or bundles of
derivatives based on corporate, mortgage and sovereign debt – collapsed
from a peak of $648bn in 2007 to $98bn in 2009.
But now those CDOs are apparently twitching again.
Telegraph:
Hong Kong Govt:
Style Underperformer:
Sector Underperformers:
- 1) Airlines -2.01% 2) Steel -1.02% 3) Semis -.91%
Stocks Falling on Unusual Volume:
- UNG, TKC, ELP, POM, STZ, RBS, BOFI, BCS, CVX, MTB, CG, VRA, RST, PAY, ASNA, FRAN, CCU, SJM, RHP, URI, DVN, ALTR, FARO, RMD, MN, BLK, BGC, GIII, MMP, AMBA, CZZ, SHOS and SWKS
Stocks With Unusual Put Option Activity:
- 1) VWO 2) EWW 3) JNK 4) KBH 5) EEM
Stocks With Most Negative News Mentions:
- 1) DHI 2) MS 3) TFM 4) RH 5) RYL
Charts:
