Style Outperformer:
Sector Outperformers:
- Gold & Silver +4.60% 2) Oil Tankers +1.79% 3) Utilities +.92%
Stocks Rising on Unusual Volume:
- GLD, INVN, PTR, SJR, NGD, CSIQ, MCP, SLT, DCM, IBN, FINL, ABFS, DAN, AG, BVN, BIIB, SLW, BCE, GG, HSP, GDX, SLV and NEM
Stocks With Unusual Call Option Activity:
- 1)BK 2) NKE 3) DVA 4) VWO 5) CVC
Stocks With Most Positive News Mentions:
- 1) CVX 2) FFIV 3) LMT 4) BBBY 5) BIIB
Charts:
Evening Headlines
Bloomberg:
- Bad-Loan
Alarm Sounded by Record Bank Spread Jump: China Credit. Borrowing costs
for Chinese banks have surged the most in at least six years this month
as rating companies say a cash crunch threatens to swell bad loans. The
yield spread for one-year AAA bank bonds over similar-maturity
sovereign notes jumped 56 basis points so far this month to 163 basis
points, the most in ChinaBond records going back to 2007. Even as China
Construction Bank Corp. President Zhang Jianguo said yesterday cash
conditions have normalized, the benchmark seven-day repurchase rate was
fixed at 6.85%, almost twice the 3.84% average for this year.
Money-market rates touched the highest level last week since at least
2004, prompting three of the largest rating agencies to warn banks may
run out of cash to pay investors in their wealth management products and
to extend new loans, increasing the risk their customers will default.
"There could be unintended consequences from the central bank's
approach," said Liao Qiang, a Beijing-based director at S&P. "We
expect some deleveraging at banks' interbank and wealth management
businesses to unfold. Credit would slow. This could pressure banks'
asset quality."
- Hong Kong Stocks Fail to Lure JPMorgan(JPM) With Worst Developed Drop. Hong
Kong stocks are set for the biggest decline among developed markets
this half as concern about China’s economy drives valuations 22 percent
below the five-year average. The Hang Seng Index tumbled 9.8 percent in
2013, trailing the Standard & Poor’s 500 Index by the most in 15
years and wiping more than $145 billion from
the value of shares.
- Hong Kong Protests to Underscore Leung’s Record-Low Appeal.
Tens of thousands of demonstrators will march in Hong Kong on Monday,
calling for greater democracy and action to narrow the wealth gap, as
city leader Leung Chun-ying battles near record-low popularity. The July 1 rally, to mark the anniversary of Hong Kong’s
1997 return to Chinese rule, will draw at least 50,000 people,
said Jackie Hung, convenor at the Civil Human Rights Front,
which is organizing the protest.
- Japan Recovery Strengthened in May. Consumer
prices excluding fresh food were unchanged from a year before as a
weakening yen sent utility costs up at the fastest pace in almost five
years. Prices excluding fresh food and energy fell 0.4 percent in May
from a year earlier, the statistics bureau in Tokyo reported today.
Industrial production advanced 2 percent from April driven by demand
from power companies. Retail sales gained 1.5 percent from the previous
month.
- Asian Stocks Gain.
Toyota Motor Corp. (7203), the world’s biggest carmaker, rose 1.7
percent in Tokyo, pacing gains among the exporters. Mitsubishi UFJ
Financial Group Inc., Japan’s No. 1, climbed 4.3 percent after the
nation’s industrial output and retail sales exceeded expectations. Sands
China Ltd., a Macau casino operator controlled by billionaire Sheldon
Adelson, added 1.9 percent in Hong Kong after saying revenue from
high-stake gamblers hasn’t declined as China’s economic growth slows. The MSCI Asia Pacific Index climbed 1.4 percent to 130.05
as of 11:11 a.m. in Tokyo, with all 10 industry groups on the
measure rising.
- Copper Set for Worst Quarter Since 2011 on China Concerns. Copper
and the London Metal Exchange
Index of six primary metals headed for the biggest quarterly
declines since September 2011 amid as signs of slowing in China and
uncertainty about the future of stimulus in the U.S. Metal for delivery
in three months on the LME dropped as much as 1.3 percent to $6,660.50 a
metric ton and was at $6,753.50 by 10:42 a.m. in Shanghai. Copper fell
10 percent this quarter while the index dropped 9.9 percent. The index
touched 2,911 on June 24, the lowest since June 2010. Economists
from Goldman Sachs Group Inc. to China International Capital Corp. this
week cut their China growth forecasts for this year. China’s central
bank on June 25 called
on big banks to further their roles as market stabilizers, as
signs of the nation’s biggest squeeze on credit in at least a
decade pushed interbank borrowing costs to a record last week.
China accounts for more than 40 percent of world copper
consumption.
- Gold Extends Decline to 34-Month Low on Worst Quarter Since 1920.
Gold fell for a fifth day to the
lowest in 34 months and was set for the worst quarterly slump in
at least nine decades amid speculation the U.S. Federal Reserve
will reduce stimulus as economic data beat estimates. Silver
headed for its biggest quarterly loss since 1980. Spot bullion slid as
much as 1.7 percent to $1,180.50 an ounce, the lowest since August 2010,
and traded at $1,192.80 at 9:54 a.m. in Singapore. Prices have
dropped 25 percent since the start of April, the biggest quarterly slide
since at least 1920, according to data compiled by Bloomberg. Silver
headed for its
worst quarter since the Hunt brothers tried to corner the
market, while platinum tumbled to the lowest since October 2009.
- Egyptians Hoard Food as Protests Raise Concern of More Mayhem. Ashraf Fouad has stuffed 30,000
Egyptian pounds ($4,300) in a wall safe in his Cairo apartment.
Across town, Niven Mankarious has been stocking up on chicken,
cheese and other food to last her family a month. Like many Egyptians, they are anxious over the unclear
direction their country is taking and fearful that violence will
be ignited by June 30 protests aimed at ousting the country’s
first democratically elected civilian president, the Islamist
Mohamed Mursi. Tensions over this watershed in Egypt’s
transition from autocratic rule has battered its stocks and
bonds, with the risk of sovereign default at an all-time high.
- Nike(NKE) Fourth-Quarter Profit Tops Estimates as U.S. Gains. Orders for the Nike brand from June to November, excluding
the effects of currency exchange-rate changes, advanced 8
percent. Analysts projected a gain of 8.8 percent, the average
of five estimates compiled by Bloomberg. Orders on that basis
advanced 12 percent from a year earlier.
Nike declined 1.9 percent to $61.15 in extended trading at 7:31 p.m. in
New York. The company’s business in China looks like it’s “still a work
in progress,” Svezia said, after orders there were little changed.
“There was some hope that they were turning the
corner.”
In China, which had been one of Nike’s fastest-growing
markets, sales excluding currency fluctuations fell 1 percent,
the third quarterly decline in a row. The company has blamed the
deterioration on a slowing Chinese economy and the discounts.
Wall Street Journal:
- Senate Approves Overhaul of Immigration Laws. Lawmakers Voted 68-32 to Back Bipartisan Bill; Now Goes to House.
The Senate easily passed the most sweeping changes to immigration law
in nearly 30 years, sending the landmark measure to the House, where
conservative lawmakers threaten to slow the drive to grant legal status
to many of the estimated 11 million people living illegally in the U.S.
The 68-32 vote Thursday marked a major step in a long-debated overhaul
to the immigration system and drew ceremonial flourish. Vice President
Joe Biden presided over the proceedings, and lawmakers rose from their
desks to cast their votes, a rarely used gesture of formality.
- Anti-U.S. Anger Rises in Egypt. Secularist-Leaning Opposition Groups Say White House Is Supporting the Islamist Leadership They Hope to End. As Egyptians prepare for massive protests against President Mohammed
Morsi on Sunday, a large piece of opposition activists' anger is being
directed at the U.S. and its perceived support for Egypt's ruling
Islamists. A flurry of newspaper articles, talk shows and public statements over
the past few weeks have singled out the U.S. for particular scorn while
accusing America's diplomatic mission in Cairo of acting as a sort of
puppet master behind Mr. Morsi's administration.
- Google(GOOG) Is Developing Android Game Console. Google
is developing a videogame console and digital wrist watch powered by
its Android operating system. Google is hoping to combat similar devices
that Apple(AAPL) may release in the future.
MarketWatch.com:
- China top auditor warns on rising debt: report. China's top auditor on Thursday warned about risks threatening the
country's economic development and called for better management of
state-owned assets, according to a Xinhua news report. Speaking at an
ongoing session of the Standing Committee of the National People's
Congress -- China's parliament -- Liu Jiayi, auditor general of the
National Audit Office, said local governments must improve their debt
management as their borrowings have surged. The debt level at 18
provincial-level governments and municipalities had soared to 3.85
trillion yuan ($626 billion) by the end of last year, according to a
report submitted to the committee, the report said. Audits showed some
companies "blindly invested" in some industries, and some 45 projects
without approval had invested 58.3 billion yuan by the end of 2011, Liu
reportedly said.
- South Korea industrial output unexpectedly shrinks. South Korea's industrial production unexpectedly
shrank in May, swinging back to contraction from April's brief
turnaround to expansion in months, government data showed Friday. Industrial output was down 1.4% on-year in May largely on falling
shipments of machinery and oil-refinery goods, after a revised 1.6%
expansion in April following two months of contraction, according to
Statistics Korea. The May reading failed to meet the median forecast of a 1.3% on-year
expansion projected in the Dow Jones poll of seven economists.
CNBC:
Zero Hedge:
Business Insider:
New York Times:
- An Old Champion Returns for Mortgage-Based Bonds. With the recent turmoil in the bond markets, however, the offering
was not without drama. The structure of the offering was changed to
offer buyers more protection against losses, according to a person
briefed on the matter who was not authorized to speak about the private
deal. The firm, Shellpoint Partners, of which Mr. Ranieri is
chairman, sold $251 million in residential mortgage-backed securities
tied to loans that are not backed by Fannie Mae or Freddie Mac. The
largest portion of the deal was sold at a rate of 2.85 percentage points
above ultrasafe government debt, according to the person briefed
on the deal.
- Moody’s Shows Wider Pension Gap for States. Moody’s
Investors Service, dissatisfied with the way states measure what they
owe their retirees, released its own numbers on Thursday, showing that
the 50 states have,
in aggregate, just 48 cents for every dollar in pensions they have
promised. That is much less than the 74 cents on the dollar that
the states now report, suggesting the states are short by about $980
billion, with many local governments, like school districts, being on
the hook for additional billions that they have not disclosed at all.
Reuters:
- Accenture(ACN) cuts full-year outlook as consulting slows further. Outsourcing
and consulting services provider Accenture Plc cut its full-year
outlook, citing a pullback in spending by its consulting business
clients, after reporting third-quarter revenue below analysts'
estimates.
Shares of Accenture, whose
clients include London's Heathrow Airport, Nokia Oyj, Baker Hughes Inc
and AstraZeneca UK, were down 7 percent at $74.60 in extended trading on
Thursday.
- U.S. muni bond funds report $4.53 bln outflows, largest on record. U.S. municipal bond funds reported $4.53
billion of net outflows in the week ended June 26, the largest
withdrawal on record going back to 1992 and more than twice the
$2.22 billion of net outflows the week before, according to data
released by Lipper on Thursday.
Financial Times:
- Nike(NKE) to tackle rising Asian labour costs. Nike
is to tackle rising labour costs at its Asian factories by “engineering
the labour out” of its shoe and clothing production as it seeks to
defend its profits. Don Blair, Nike’s chief financial officer, said
its objective was to reduce the number of people making its products as
he highlighted the impact of a sharp increase in wages in Indonesia.
Telegraph:
- Tempers fray in France as drastic cuts loom. France's budget watchdog has called for another round of drastic cuts and an
immediate freeze in public sector pay and benefits, warning that public
finances are badly off track as deep recession eats into tax revenues.
Evening Recommendations
Night Trading
- Asian equity indices are +.50% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 151.50 +1.5 basis points.
- Asia Pacific Sovereign CDS Index 112.75 -4.5 basis points.
- NASDAQ 100 futures -.16%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The NAPM-Milwaukee for June is estimated to rise to 45.2 versus 40.7 in May.
9:45 am EST
- The Chicago Purchasing Manager for June is estimated to fall to 55.0 versus 58.7 in May.
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for June is estimated to rise to 83.0 versus a prior estimate of 82.7.
Upcoming Splits
Other Potential Market Movers
- The Fed's Stein speaking, Fed's Lacker speaking, Fed's Pianalto speaking, Fed's Williams speaking and the Canadian GDP report could also impact trading today.
BOTTOM LINE: Asian
indices are higher, boosted by consumer staple and industrial shares in
the region. I expect US stocks to open modestly higher and to
weaken into the afternoon, finishing mixed. The Portfolio is 50% net
long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Almost Every Sector Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 16.72 -2.85%
- Euro/Yen Carry Return Index 133.78 +.92%
- Emerging Markets Currency Volatility(VXY) 11.07 -1.77%
- S&P 500 Implied Correlation 58.28 -1.49%
- ISE Sentiment Index 62.0 -24.29%
- Total Put/Call .99 +16.47%
Credit Investor Angst:
- North American Investment Grade CDS Index 85.87 -2.42%
- European Financial Sector CDS Index 163.30 -2.79%
- Western Europe Sovereign Debt CDS Index 95.0 -1.24%
- Emerging Market CDS Index 318.38 -4.93%
- 2-Year Swap Spread 15.0 +.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -10.50 +1.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .05% -1 bp
- China Import Iron Ore Spot $115.30/Metric Tonne +1.32%
- Citi US Economic Surprise Index -7.10 +.9 point
- Citi Emerging Markets Economic Surprise Index -36.30 +.8 point
- 10-Year TIPS Spread 1.98 +3 bps
Overseas Futures:
- Nikkei Futures: Indicating +357 open in Japan
- DAX Futures: Indicating -8 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/retail/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Junk Bonds Drop Below Par as Asia Suffers China: Credit Markets. For
the first time since August, junk bonds are trading below par amid
speculation that companies will have a harder time meeting debt payments
as the Federal Reserve prepares to reduce its extraordinary stimulus
measures and China reins in its shadow-banking system. Average prices
on speculative-grade corporate notes dropped to 99.42 cents on the
dollar on June 25, from a record 106.04 cents in May, according to Bank
of America Merrill Lynch’s Global High Yield Index. The declines were
led by Asia, which
saw prices tumble to 97.2 cents, the lowest level in a year.
- European Stocks Climb After U.S. Data; Alcatel Rallies.
European stocks climbed for a third day, the longest winning streak for
the Stoxx Europe 600 Index in five weeks, as a report showed that U.S.
consumer spending rebounded last month. Alcatel-Lucent (ALU) SA rose 6.4
percent as Morgan Stanley recommended the stock. Drax Group Plc jumped
7.3 percent as the U.K. government updated the subsidies for the
different forms of renewable-power generation. Subsea 7 SA (SUBC)
tumbled the most in more than 4 1/2 years after the oil-field services
provider said its
earnings will fail to grow this year. The Stoxx 600 climbed 0.7 percent to 286.42 at the close
after earlier declining as much as 0.3 percent.
- Fed’s Powell Sees Scaling Back Asset Purchases Later This Year. Federal Reserve Governor Jerome Powell said the central bank’s asset purchases may be scaled
back later this year if growth holds up, and any such trimming
depends on economic data rather than the calendar. The Fed may wait “before moderating purchases or even
increase them” if the economy weakens, while the large-scale
asset purchases “may be moderated somewhat more quickly”
should the economy strengthen faster than officials anticipate, Powell said today in the text of remarks prepared for delivery in Washington.
- Gold Tumbles to 34-Month Low. Gold
futures for August delivery dropped 2.2 percent to $1,202.30 at 2:01
p.m. on the Comex in New York. The price touched $1,198.90, the lowest
since August 2010. The metal headed for a record quarterly drop amid an equity rally and
muted inflation.
- Natural Gas Drops to 16-Week Low on Above-Forecast Supply Gain. Natural
gas futures fell to the
lowest price in 16 weeks in New York after U.S. stockpiles increased
more than forecast. Gas tumbled as much as 4.7 percent as the Energy
Information Administration said inventories rose 95 billion cubic feet
in the week ended June 21 to 2.533 trillion cubic feet. Analyst
estimates and a survey of Bloomberg users both showed a 90-billion
increase. Supply gains have topped five-year averages for four straight
weeks as mild weather reduced demand. ”Today’s inventory report is a
reflection of the fact that we have very sluggish demand picture right
now,” said Dominick Chirichella, senior partner at the Energy Management
Institute in New York. “I don’t see a significant call on natural gas
for power generation to meet cooling needs because cooling needs aren’t
going to be all that high.” Natural gas for August delivery dropped
16.3 cents, or 4.3 percent, to $3.575 per million British thermal units
at 12:17 p.m. on the New York Mercantile Exchange after sinking to
$3.563, the lowest intraday price for a front-month contract
since March 7. Trading was 36 percent above the 100-day average
for the time of day.
- Crude Rises for Fourth Day as U.S. Jobless Claims Drop. WTI for August delivery rose $1.63, or 1.7 percent, to
$97.13 a barrel at 1:21 p.m. on the New York Mercantile
Exchange. The price reached $97.41, the highest since June 20.
The volume of all futures traded was 5.2 percent higher than the
100-day average for the time of day. Futures were little changed
the second quarter.
Fox News:
- Watchdog knocks down Dem claim that liberal groups were targeted by IRS. The government watchdog that exposed IRS targeting of conservative
groups gave a blunt response to Democrats' claims that the agency also
targeted liberals: It never happened. "We found no indication in any of these other materials that
'Progressives' was a term used to refer cases for scrutiny for political
campaign intervention," IRS Inspector General J. Russell George wrote
in a letter to Democrats.
CNBC:
Zero Hedge:
Business Insider:
CNNMoney:
- Mortgage rates soar to 4.46% - biggest jump in 26 years.
Rising interest rates have hit mortgages big time. Rates on
30-year, fixed-rate home loans spiked 0.53 percentage points to an
average of 4.46% this week -- the largest weekly increase in more than
26 years, according to mortgage giant Freddie Mac. The 30-year loan,
which stood at 3.35% as recently as early May, is at its highest level
since July 2011. Rates for 15-year loans, popular with homeowners
refinancing their mortgages, jumped 0.46 percentage points to 3.5%. An extra percentage point will cost homebuyers with 30-year, fixed-rate
mortgages $56 more a month for every $100,000 they borrow.
PilotOnline.com:
- Smithfield(SFD) sale warrants close federal review. FOR VIRGINIANS, Smithfield Foods represents a taste of home. When news
broke of a merger agreement between China's largest meat processing
enterprise and Smithfield, many mourned the loss of a hometown company
to a Chinese firm.
Reuters:
- Brazil central bank sees inflation up, GDP growth down. Brazil's central
bank raised its inflation forecasts for 2013 and 2014, signaling
that policymakers could accelerate the pace of interest-rate
increases in coming months to bring down persistent price
pressures. In its quarterly inflation report released on Thursday, the
central bank raised its 2013 inflation forecast to 6.0 percent
from 5.7 percent. That is above the bank's own informal goal for the year to
bring inflation below the 5.84 percent posted in 2012. The new
forecast for 2013 topped private estimates in a weekly central
bank survey.
Financial Times:
- Iran, Russia and China prop up Assad economy. Iran,
Russia and China are propping up Syria’s war-ravaged economy, with
President Bashar al-Assad’s regime doing all its business in
rials, roubles and renminbi as it seeks to beat western sanctions,
according to the country’s senior economics minister.
WBP Online:
- Spanish retail sales decline 4.6% in May. Retailers reported that sales dropped 4.6% in April, seasonally and
calendar adjusted, after recording a upwardly revised 4.8% year-on-year
decline in April. Analysts had expected a 6.7% contraction. Retail
sales on a calendar adjusted basis in Spain have been on a downward
slide since June 2010, while the extent of the 4.6% year-on-year drop
this month is the lowest since August last year.
Xinhua:
- China Faces 'Huge' Pressure to Meet Fiscal Revenue Goal. China
faces "huge" pressures to meet annual fiscal revenue goal after central
government's fiscal revenue drops -.8% y/y in Jan.-April period, citing
Finance Minister Lou Jiwei. The central government fiscal revenue will
need to growth +11.3% monthly in the remainder of this year to meet the
target, Lou said in a report to the National People's Congress today.
Style Underperformer:
Sector Underperformers:
- 1) Agriculture -.02% 2) Medical Equipment +.22% 3) Road & Rail +.36%
Stocks Falling on Unusual Volume:
- TU, RCI, EXXI, CRK, DTV, YZC, BCS, CLD, LUV, SIR, RCI, SSW, PAYX, PBYI, NSH, SRPT, APD, MKC, AGN, NLNK, FLT, SCHN, MOS, EXXI, WMC, MON, ISIS, TRIP and UNG
Stocks With Unusual Put Option Activity:
- 1) COF 2) NKE 3) STZ 4) SLB 5) BBBY
Stocks With Most Negative News Mentions:
- 1) VNO 2) APD 3) PAYX 4) M 5) SSW
Charts:
Style Outperformer:
Sector Outperformers:
- HMOs +2.22% 2) Alt Energy +1.90% 3) Oil Tankers +1.76%
Stocks Rising on Unusual Volume:
- NIHD, EVC, CSIQ, WPRT, CAG, SBAC, TWC, CYTK, LPI and INVN
Stocks With Unusual Call Option Activity:
- 1) TWC 2) LUV 3) MSI 4) TMUS 5) RDN
Stocks With Most Positive News Mentions:
- 1) WDC 2) PCP 3) CAG 4) AMZN 5) LMT
Charts:
