Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.45 +5.45%
- Euro/Yen Carry Return Index 137.94 +.58%
- Emerging Markets Currency Volatility(VXY) 8.95 +2.05%
- S&P 500 Implied Correlation 53.30 +4.51%
- ISE Sentiment Index 88.0 +10.0%
- Total Put/Call .97 +1.04%
Credit Investor Angst:
- North American Investment Grade CDS Index 76.66 +2.20%
- European Financial Sector CDS Index 143.22 -2.40%
- Western Europe Sovereign Debt CDS Index 91.0 -.54%
- Emerging Market CDS Index 293.17 +5.2%
- 2-Year Swap Spread 15.75 -1.75 bps
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 +.5 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- China Import Iron Ore Spot $132.10/Metric Tonne +.15%
- Citi US Economic Surprise Index -7.50 +1.4 points
- Citi Emerging Markets Economic Surprise Index -30.80 -.9 point
- 10-Year TIPS Spread 2.15 -3 bps
Overseas Futures:
- Nikkei Futures: Indicating -16 open in Japan
- DAX Futures: Indicating -23 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short, then covered some of them
- Market Exposure: 50% Net Long
Bloomberg:
- Rolls-Royce China Sales Flatline Amid Xi Austerity Drive.
Rolls-Royce, the ultra-luxury car
brand owned by Bayerische Motoren Werke AG (BMW), expects sales growth
to slow in China this year as an austerity push by President Xi Jinping
damps luxury demand. Sales volumes in the company’s second-largest market will be little changed from 2012, Paul Harris, Asia-Pacific regional director for the brand, said in Sydney yesterday. By comparison, Rolls-Royce sales rose 16 percent to 998 vehicles last year, according to estimates at research firm LMC Automotive. Slowing
growth in China for the maker of the $380,000 Phantom mirrors the slide
in demand this year for sorghum liquor, hand-made tea and Bordeaux
wines, as economic expansion cools and the country’s new administration
acts to curb spending by government officials. More high-end goods such
as luxury cars and yachts may be taxed as part of reform plans this
year, the China Daily reported in May, citing an official at the top
economic planning agency.
- Brazil Unemployment Rate Jumps More Than Expected to 6%.
Brazil’s unemployment rate rose in June to the highest since April
2012, signaling a weakening labor market after five quarters of
below-forecast economic growth in Latin America’s biggest economy. The jobless rate jumped to 6 percent last month from 5.8 percent in May, according to a report today on the National
Statistics agency’s website. That was higher than expected by
all but 1 of 27 economists surveyed by Bloomberg, whose median
forecast was for a 5.8 percent rate. The rate also rose from 5.9
percent the year before, the first rise in June since 2009.
- Brazil Rues Rousseff Growth at 24-Year Low Amid Lula Pleas. The return to power of Luiz Inacio Lula da Silva, the mentor and predecessor of Brazil President
Dilma Rousseff, is gaining traction among her supporters as her
party faces a 2014 election having delivered the slowest average
growth in 24 years. Rousseff’s poll approval ratings have plummeted to the
lowest of her term, and since mid-June she was showered with
boos at a sold-out soccer game and by dozens of mayors at a
public event. More than 1 million Brazilians took to the streets
as the cost of living soars and economic growth forecasts drop.
Protests escalated from anger over bus fare increases to
discontent over corruption, the quality of public services and
government spending priorities.
- Spanish Pension Raids Spell Bad News for Bond Sales: Euro Credit. Spain’s
Treasury may find one of its best customers less eager to buy its bonds
as budget woes lead Prime Minister Mariano Rajoy to raid a government
piggy-bank for a second year. Created in 2000 to guarantee pension
payments in times of hardship, the 59.3 billion-euro ($78 billion) Fondo
de Reserva was tapped for the first time in December for 7 billion
euros to fund Christmas bonuses and a monthly increase for retirees.
Further withdrawals will have taken an additional 4.5 billion euros by
the end of this month, helping to pay for pensioners’ summer bonuses and
tax refunds. “The fund isn’t in a position to accumulate assets
anymore, it may even have to sell,” said Jose Antonio Herce, a partner
at consultancy firm Analistas Financieros Internacionales in Madrid.
“There are more and more pensions to
pay and less and less money coming into the Social Security, the
fund will melt quickly now that we’ve started taking money out
of it.”
- EU Attacks MasterCard’s(MA) ‘Mad Campaign’ to Derail Card-Fee Curbs. MasterCard
Inc. (MA:US) waged a “mad campaign” to derail caps on card fees, the
European Union’s financial services commissioner said today as he
unveiled plans to slash charges by 6 billion euros ($8 billion) a year. Michel Barnier said MasterCard used misleading information
in its lobbying against proposals to cap interchange fees at 0.2
percent for debit card payments and 0.3 percent for credit
cards. The limits target card systems also operated by Visa
Europe Ltd. where banks charge each other interchange fees, or
swipe fees, for handling payments.
- Europe Stocks Rise on Earnings, Euro-Area Manufacturing.
European stocks rose to an almost eight-week high as data signaled
Germany is leading a revival in euro-area manufacturing and companies
posted results that exceeded estimates.Volvo AB (VOLVB) advanced the
most in 10 months after the world’s second-largest truckmaker reported
second-quarter earnings that beat forecasts. EasyJet climbed 3.7 percent
after saying quarterly sales rose 11 percent on higher capacity
utilization and revenue per seat. Syngenta (SYNN) AG fell 4 percent
after posting
first-half profit and revenue that trailed forecasts. The Stoxx Europe 600 Index added 0.6 percent to 301.1 in
London, the highest close since May 30.
- Treasuries Extend Decline on Weaker-Than-Average 5-Year Auction. Treasuries extended a two-day
decline after the U.S. sale of $35 billion in five-year notes
was met with weaker than-average demand amid speculation the Federal Reserve will reduce its bond purchases this year.
The debt’s bid-to-cover ratio, which gauges demand by comparing total
bids with the amount of securities offered, was 2.46, down from an
average of 2.8 for the past 10 sales. The
sale follows lower than demand at yesterday’s $35 billion
auction of two-year notes. The U.S. will sell $39 billion in
seven-year notes tomorrow.
- Americans Gambling on Rates With Most ARMs Since 2008. In the second year of the U.S. housing recovery, the loans that helped
trigger the housing bust are making a comeback. Applications in late
June rose to the highest level since 2008 after the Federal Reserve sent
fixed rates surging by signaling it may curtail bond buying credited
with pushing borrowing costs to the cheapest on record.
- Caterpillar(CAT) Cuts Forecast as Mining Equipment Demand Drops.
Caterpillar Inc. (CAT) cut its earnings forecast and posted profit that
trailed analysts’ estimates for a third straight quarter as
mining-equipment sales declined on slower commodity demand from emerging
markets. Earnings in 2013 will be about $6.50 a share on sales of $56 billion to $58 billion, the Peoria, Illinois-based company
said today in a statement. That’s lower than analysts’ estimates
and down from the company’s April projection of about $7 a share
on revenue of $57 billion to $61 billion.
- WTI Falls on U.S. Crude Output Gain, China Manufacturing. WTI
oil for September delivery slipped $1.89, or 1.8 percent, to $105.34 a
barrel at 11:57 a.m. on the New York Mercantile Exchange. The contract traded at $106.40 before the release of the EIA report at 10:30 a.m. in Washington. The
volume of all futures traded was 18 percent less than the 100-day average for the time of day.
Wall Street Journal:
- New York Probes Bloomberg Reporters' Access to Information. New York Attorney General Eric Schneiderman's office is looking into how much access Bloomberg LP news reporters may
have had to information about the media and technology company's
customers, said people familiar with the inquiries. Officials in the New York Attorney General's investor protection unit
in recent weeks have queried Bloomberg about reporters' knowledge of
terminal subscribers' activities, said the people. The Attorney
General's office has not opened a formal investigation into the
Bloomberg practices, said one of the people familiar with the probe.
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
New York Times:
- Asian Economies Encounter Stiff Winds. “The music has stopped playing,” said Frederic Neumann, a co-head of
Asian economics at HSBC, which on July 9 slashed its growth forecasts
for Asia, outside of Japan, to 6.1 percent for this year and 6.5 percent
next year. The bank had projected 7.2 percent growth for both years.
CNN:
- Borrowers in Obama housing program re-defaulting, watchdog says.
Borrowers who received help through the government's main foreclosure
prevention program are re-defaulting on their mortgages at alarming
rates, a federal watchdog said in a report released Wednesday. Nearly
1.2 million mortgage modifications have been completed since the Home
Affordable Modification Program (HAMP) was first launched four years
ago. Yet more than 306,000 borrowers have re-defaulted on their loans
and more than 88,000 are at risk of following suit, the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) found in its quarterly report to Congress.
Value Walk:
Real Clear Politics:
Reuters:
- EU finance arm curbs loans to coal-fired power plants. The European Investment Bank, the EU's finance arm, said it would stop lending to most coal-fired power stations to
help the 28-nation bloc reduce pollution and meet climate targets, a
move that may put pressure on other lenders.
- Credit market suggests European bank shares vulnerable on earnings. European
bank shares driven
higher by strong earnings from U.S. lenders may be set for a fall as
their own results season begins, with credit markets reflecting wariness
about risks glossed over by equity investors. Forecast-beating earnings from Bank of America and Citigroup lifted shares in European banks last week.
However, the market for insurance against banks defaulting on their
loans shows more caution over the European sector, which is still
struggling with bad debts in the euro zone periphery and regulatory
costs. Thomson Reuters StarMine data shows the second-quarter earnings season is set to disappoint, relative to that in the
United States. Early reports have not seen much of a bounce in
the shares of those European banks that beat expectations. "The credit is a lot more cautious than equity... and
European financials are a major culprit from the equity
standpoint: they're running ahead of the underlying risks,"
Chris Parkinson, head of research at Christopher Street Capital,
part of GFI Group, said.
AP:
- LG's profit falls on weak TV demand, handset costs. LG Electronics' latest quarterly report underlined challenges facing
global electronics makers as weak TV demand and stiffer competition in
smartphones undermine profit. The results Wednesday showed an 8
percent decline in April-June net profit to 155.5 billion won ($140
million) even as LG's revenue rose 10 percent from a year earlier to
15.2 trillion won ($13.6 billion). Operating profit fell 9 percent from a
year earlier to 479 billion won.
Financial Times:
- Market turbulence revives fears over ETF structural issues.
Falling
equity markets have resulted in the highest level of failed trades in
the $2tn exchange-traded fund (ETF) market for nearly two years –
reviving a debate about the structure and liquidity of the popular
investment vehicles in times of volatility. The total value of settlement failures for 30 of the biggest
ETFs surged to $3.96bn on June 26, according to an analysis of data
from the US securities regulator, carried out by the Basis Point Group.
Echoing fears that
European policymakers remain in a state of cognitive dissonance –
recognizing the need for root-and-branch overhaul of peripheral banks,
but backtracking on joint liability plans – Christopher Flowers, the
legendary FIG investor who now runs the £2.3 billion ($3.5 billion)
private equity group JC Flowers, sounded the alarm over the negative
sovereign-bank feedback loop.
In a shot across the bows of market bulls, who cite the return of
capital flows to weaker eurozone states, Flowers issued a stark warning:
"There is a scenario where we have a Lehman-type event: we wake up some
Thursday and a big country is in trouble.
"And the ECB will have to decide to support banks x, y, z. And then the
ECB will, in fact, decide to own bank x, y, z.
While we want you to share, we ask you use the functions on-site rather than copy/paste. See T's & C's for details. http://www.euromoney.com/Article/3211790/CurrentIssue/88924/Restructuring-Flowers-slams-Europe-over-inaction.html?copyrightInfo=true
Repubblica:
- IMF Italy Chief Says Credit Crunch EU's Key Problem. EU banking
union project needs to go forward quickly, Andrea Montanino, executive
director of the IMF in Italy said in an interview. Banks' loans to
companies and families need to be looked at and if needed banks should
boost capital. The ECB should cut rates further to help recovery.
Xinhua:
- China
to Crack Down on Arbitrary School Charges. Ministry of Education bans
local govts, institutions, schools to charge for school admissions, bars
illegal recruitment, citing guideline jointly released by finance,
education ministries, NDRC, audit office, broadcasting &
publication regulator.
- China Caps Number of Singing-Competition TV Shows. State General
Administration of Press, Publication, Radio, Film & TV tells
satellite broadcasters to stop investing in any new singing competition
shows, citing news release. Regulator seeks to prevent homogeneous TV
schedules. Broadcasters must be "thrifty" with program production, avoid
ostentation in line with govt's frugality campaign.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -5.11% 2) Coal -4.54% 3) Homebuilders -3.34%
Stocks Falling on Unusual Volume:
- SZYM, FCF, FBP, CVE, PBR, VIV, EVC, GTN, CKSW, SEAC, JBLU, SRPT, PNRA, BRCM, RUSHA, SLRC, OC, HTS, HCI, ZOLT, CEVA, USNA, ATMI, GWAY, WLT, IRBT, NSC, STX, MSI, ROL, MGI, LAD, GNTX, MTH, NEOG, NSR, CMO, TA, JOY, RLGY, MFRM, TROW, RPRX, ATI and MSI
Stocks With Unusual Put Option Activity:
- 1) EMC 2) BRCM 3) PNRA 4) NUE 5) WDC
Stocks With Most Negative News Mentions:
- 1) PCAR 2) VCLK 3) ATI 4) CP 5) MUR
Charts:
Style Outperformer:
Sector Outperformers:
- Airlines +1.57% 2) Software +.89% 3) Defense +.75%
Stocks Rising on Unusual Volume:
- VMW, AFOP, EA, UIS, AAPL, PWRD, EZCH, GDP, IRE, FMER, MFB, USU, EVR, HBI, ILMN, LL, ARW, EMC and RKT
Stocks With Unusual Call Option Activity:
- 1) QLIK 2) SRPT 3) VMW 4) BRCM 5) DG
Stocks With Most Positive News Mentions:
- 1) LMT 2) ALTR 3) JNPR 4) SVU 5) LLY
Charts:
Evening Headlines
Bloomberg:
- China’s Manufacturing Weakens Further as Slowdown Deepens.
China’s manufacturing weakened further in July, signaling the worst of
the nation’s slowdown has yet to be reached, according to a preliminary
survey of purchasing managers. The reading of 47.7 for an index released today by HSBC Holdings Plc and Markit Economics, was less than
estimated and if confirmed in the final report Aug. 1, would be the
lowest in 11 months. “The key thing now is confidence,” Qu Hongbin, HSBC’s chief China economist in Hong Kong, said on Bloomberg Television.
“The confidence now is pretty weak both in the financial market and the
corporate sector.” The median estimate of 19 economists surveyed by
Bloomberg News for the preliminary, or Flash Purchasing Managers’ Index,
was for 48.2, the same level as in June.
- China Coal-Fired Economy Dying of Thirst as Mines Lack Water. Daliuta in Shaanxi province sits on top of the world’s
biggest underground coal mine, which requires millions of liters
of water a day for extracting, washing and processing the fuel.
The town is the epicenter of a looming collision between China’s
increasingly scarce supplies of water and its plan to power
economic growth with coal.
- BlackRock(BLK) Sees Aussie at 80 Cents After Short. BlackRock Inc. (BLK), the world’s biggest fund manager, said Australia’s dollar may drop as low as 80 U.S.
cents in the coming nine months after bets against the currency
helped give one of its bond funds the nation’s best returns.
- China’s Stocks Fall After Unexpected Drop in Manufacturing Gauge. China’s
stocks fell for the first time in three days, led by financial and
commodity companies, as an unexpected decline in a preliminary
manufacturing index boosted concern the economic slowdown is deepening. Jiangxi Copper Co., the nation’s biggest producer of the metal, declined 2 percent, while China Petroleum and Chemical
Corp., Asia’s largest refiner, dropped the most in a week. China
Merchants Bank Co. led losses for lenders, sliding to a one-month low after its rights offering was approved. The Shanghai Composite Index (SHCOMP) fell 1.1 percent to 2,021.66 at 10:24 a.m. local time.
- Asian Stocks Decline as Preliminary China PMI Contracts.
Asian stocks fell, with the regional benchmark index retreating from a
two-month high, after a private survey showed China’s manufacturing
contracting at a faster-than-estimated pace. Jiangxi Copper Co. (358),
China’s biggest producer of the metal, slipped 2.1 percent in Hong Kong.
Kao Corp., a maker of household and chemical products, fell 4.5 percent
in Tokyo after giving an update on a product recall. Murata
Manufacturing Co., a Japanese supplier to Apple Inc., gained 4 percent
after Apple’s profit topped estimates. The MSCI Asia Pacific Index fell 0.1 percent to 137.08 as
of 11:59 a.m. in Tokyo, erasing gains of as much as 0.2 percent.
- Rubber Futures Decline After China Flash PMI Misses Estimate.
Rubber snapped a five-day winning
run after a private survey showedthat China’s manufacturing contracting
at a faster-than-estimated pace this month, increasing concern that
demand may slow in the largest user. Rubber for delivery in December
dropped as much as 0.7 percent to 254.4 yen a kilogram ($2,553 a metric
ton) on the Tokyo Commodity Exchange and traded at 255 yen at 11:05 a.m.
local time. Earlier, the price rose to 259.3 yen, the highest
intraday price since July 19.
- Spanish Pension Raids Spell
Bad News for Bond Sales: Euro Credit. Spain's Treasury may find one of
its best customers less eager to buy its bonds as budget woes lead Prime
Minister Mariano Rajoy to raid a government piggy-bank for a second
year. "The fund isn't in a position to accumulate assets anymore, it may
even have to sell," said Jose Antonio Herce, a partner at consultancy
firm Analistas Financieros Internacionales in Madrid. "There are more
and more pensions to pay and less and less money coming into the Social
Security, the fund will melt quickly no that we've started taking money
out of it."
- European Banks Face Capital Gap With Focus on Leverage. Europe’s biggest banks, which more
than doubled their highest-quality capital to $1 trillion since
2007 to meet tougher rules, may have further to go as regulators
scrutinize how lenders judge the riskiness of their assets. Deutsche
Bank AG (DBK), Barclays (BARC) Plc and Societe Generale SA (GLE) are
among European banks that issued stock, sold units or hoarded earnings
to bring capital, as a proportion of assets weighted by risk, into line
with new global rules. Now some regulators are questioning the
weightings, typically set by the banks’ own models, and embracing a
broader measure of equity to total assets known as the leverage ratio
that ignores risk. “Europe’s banks are far from done on efforts to raise capital,” Lutz Roehmeyer, who helps manage more than 11 billion
euros ($14.5 billion) at Landesbank Berlin Investment, said in
an interview. “We have to take out the arbitrary method by
which banks assign the risk of their assets.”
- IRS Executives Spent More Days on D.C. Travel Than at Home. A handful of Internal Revenue
Service executives who live outside the Washington region
commuted to the capital on most work days at taxpayer expense,
an inspector general said in a report raising management issues. In fiscal 2011 and 2012, five IRS executives traveled for
more than half the year to a single location, mostly Washington
and in one case Atlanta, according to a report released today by
the Treasury Inspector General for Tax Administration.
- CLO
Boom Takes Break as Sales Tumble on Bernanke: Credit Markets. Money
managers are creating fewer collateralized loan obligations in the U.S.
than any time since last July as concern the Federal Reserve may scale
back its stimulus efforts pushes yields to a six-month high. About $2.3
billion of CLOs have been sold this month, plummeting from $7.2 billion
in June, according to Royal Bank of Scotland Group Plc. Spreads on the
top-rated portion of the funds have risen to 130 basis points more than
lending benchmarks, from 113 basis points in May, the month Fed Chairman
Ben S. Bernanke told Congress the central bank may start curtailing its
bond buying this year. The slowdown may be a sign that banks are
pulling back from buying CLOs, making it harder for money managers who
create the funds to sell them after issuance quadrupled to $55 billion
last year.
- Fed Draws Fire for Oversight of Bank-Owned Commodity Operations. The Federal Reserve faces new
pressure to explain why it lets banks trade raw materials and
control supplies after congressional witnesses said regulators
can’t really grasp what lenders are doing in industrial
businesses. Officials from the Fed and Commodity Futures Trading
Commission may testify at hearings in September, U.S. Senator
Sherrod Brown said in an interview yesterday after witnesses
told his Senate subcommittee that commodities operations owned
by lenders are hurting customers and endangering the financial
system. He’ll also seek testimony from bankers.
Wall Street Journal:
- Prosecutors Preparing to Charge SAC. Federal prosecutors are preparing to announce criminal charges as early as this week against SAC Capital Advisors LP.
Federal prosecutors are preparing to announce criminal charges as
early as this week against SAC Capital Advisors LP, the hedge-fund
company that has been the target of a multiyear investigation into
alleged insider trading, according to people familiar with the matter.
The planned charges against SAC would mark the culmination of a
yearslong probe into suspected securities fraud at one of the biggest,
most successful hedge-fund firms in the country. The action is
anticipated barring any last-minute pact with SAC or
other reversal of government strategy, according to people familiar with
the matter.
- Easing of Mortgage Curb Weighed. Regulators are concerned that tougher mortgage rules for banks could hamper the housing recovery. Concerned that tougher mortgage rules could hamper the housing
recovery, regulators are preparing to relax a key plank of the rules
proposed after the financial crisis. The watchdogs, which include the Federal Reserve and Federal Deposit
Insurance Corp., want to loosen a proposed requirement that banks retain
a portion of the mortgage securities they sell to investors, according
to people familiar with the situation. The plan, which hasn't been finalized and could still change, would
be a major U-turn for the regulators charged with fleshing out the
Dodd-Frank financial-overhaul law passed three years ago.
- Egypt's Gaza Crackdown Hammers Economy. An aggressive crackdown by Egypt's interim government on smuggling
tunnels between Egypt and the Gaza Strip is crushing the Palestinian
enclave's economy, sparking concerns it could fuel a militant backlash.
- At Center of Oil Boom, Electricity Costs Soar. Heavy Energy Use From Drilling in West Texas Strains Power Grid, Leading to Surcharges. An oil-production boom is delivering prosperity to pockets of the U.S.,
but in West Texas, the epicenter of activity, it is also bringing
trouble in the form of surging electricity prices.
Fox News:
- US shipment of F-16s to post-Morsi Egypt hits delay. Four F-16 fighter jets were scheduled to fly to Egypt on Tuesday
morning as part of a U.S. military aid package worth more than $1
billion a year -- but the shipment has run into delays over apparent
"political" issues. If the Obama administration is able to send the planes, it will mark
the first known military aid to Egypt since millions of Egyptians
protested the rule of Mohammed Morsi, leading the Egyptian military to
remove him from power earlier this month. Supporters say that such aid is critical because it gives the U.S.
influence over the Egyptian military. But critics say it is a waste of
money, or worse -- a gift of weapons that could later be turned against
American interests.
- Anthony Weiner admits to sending more lewd images, texts but vows to stay in mayor's race. With his wife by his side, Anthony Weiner said Tuesday he's not
dropping out of the New York City mayoral race despite new revelations
that he sent additional lewd photos and text messages after he left
Congress in disgrace for his prior online chats. Weiner, who resigned his House seat in June 2011 after acknowledging
having sexual conversations with at least a half-dozen women, told a
hastily called news conference he would stay in the race despite the new
onslaught of negative publicity. “I’m sure many of my opponents would like me to drop out of the race
but I’m not going to do it,” he said, adding, he hoped the people of New
York were "willing to still continue to give me a second chance."
MarketWatch.com:
- Japan posts 12th trade deficit in a row for June. Japan on Wednesday reported a trade deficit of Y180.8
billion ($1.8 billion) for June, extending its streak of monthly
shortfalls to 12 straight months--the longest spell in over three
decades--as a weaker yen increased the import bill more than it lifted
exports. The result undershot a Y155.7 billion deficit expected by economists
polled by the Nikkei and Dow Jones Newswires. Japan recorded a trade
surplus of Y56 billion in the same month of the previous year.
Zero Hedge:
Business Insider:
Washington Post:
- Moderate Democrats are quitting on Obamacare. The
landmark health-reform law passed in 2010 has never been very popular
and always highly partisan, but a new Washington Post-ABC News poll
finds that a group of once loyal Democrats has been steadily turning
against Obamacare: Democrats who are ideologically moderate or
conservative.
Sober Look:
Reuters:
- Apple's(AAPL) margins, China sales take shine off quarterly results.
Investors
breathed more easily after Apple Inc turned in a quarterly report card
with a pleasant iPhone sales surprise. But the resultant share-price
rally may prove short-lived as Wall Street frets about sliding margins
and puzzles over a dramatic revenue drop-off in its No. 2 market of
China. Without releasing a new product, Apple sold 31.2 million units of
the iPhone - its most important device in the fiscal
third quarter - or about 20 percent more than analysts had
envisioned. The company's shares climbed 5 percent in after-hours trade,
partly on Apple saying it will buy back stock at a faster pace. But revenue from all Apple products in greater China
plummeted 43 percent from the previous quarter and 14 percent
from a year earlier - worrying for a region where smartphone
penetration is still low. Growing
competition in a maturing global smartphone market, coupled with the
rising number of lower-priced devices in Apple's line-up, such as iPad
minis and older-model phones, pushed third-quarter profit margins to
below 37 percent from more than 42 percent just a year earlier. Analysts and executives struggled to explain the slowdown in
greater China, which includes Hong Kong and Taiwan and accounts
for 13 percent of Apple's fiscal third-quarter revenue. Tuesday's stock rally may quickly lose steam, as Apple is
dogged by issues such as lower selling prices and an uncertain
product pipeline, said Colin Gillis, an analyst with BGC.
- US opens probe into steel pipe imports from 9 countries. The
U.S. Commerce Department on Tuesday
launched one of its biggest trade investigations in years into charges
that manufacturers in South Korea, India and seven other countries are
selling steel pipe used by oil and natural gas producers at unfairly low
prices in the United States. Imports of oil country tubular goods
(OCTG) from the nine countries totaled nearly $1.8 billion in 2012, more
than double their total in 2010, as rising U.S. oil and natural gas
production have increased demand for the pipe.
- Norfolk Southern(NSC) profit falls 11 pct as coal use drops. Norfolk
Southern Corp on Tuesday reported a 11 percent drop in quarterly
profit, as demand to ship coal fell, to send shares down 1 percent after
the bell. For the second quarter Norfolk, the country's
third-largest railroad, earned $465 million, or $1.46 a share, on
revenue of $2.8 billion. A year ago, Norfolk Southern reported $524
million net income, or $1.60 per share, on revenue of $2.87 billion.
Analysts, on average, expected $1.49, according to Thomson Reuters
I/B/E/S. Revenue from coal shipments was $626 million, down 17
percent from a year earlier.
- Broadcom's(BRCM) 3rd-quarter outlook adds to smartphone jitters. Broadcom
Corp forecast third-quarter revenue below expectations, underscoring
concerns on Wall Street that smartphone growth might be waning, and
sending the chipmaker's shares lower. Investors have become increasingly concerned in the past
month that the explosive growth of smartphones of recent years
might be coming to an end. Such a slowdown would hurt not only handset makers such as
Samsung Electronics and Apple, but their component suppliers as
well, such as Broadcom and Qualcomm Inc, which posts
its quarterly results on Wednesday.
- Panera(PNRA) cuts 2013 view after restaurant sales miss target. Panera
Bread Co reported quarterly profit that missed analysts' views and cut
its full-year forecast after sales growth at company-owned
bakery-cafes fell short of expectations, sending shares tumbling
more than 5 percent in after-hours trade. Panera is one of the restaurant industry's top-performing
names and when it delivers results that miss or just match Wall
Street's targets, investors punish its stock.
Financial Times:
- Regulator turf war on access to EU bank books. US
regulators are demanding the right to probe books, records and emails
at the headquarters of Europe’s biggest financial groups, prompting deep
EU unease over Washington intruding on its patch to collect highly
sensitive data. The behind-the-scenes dispute over
investigative powers to police complex markets has taken on new
significance in the wake US spying revelations, which have amplified
European fears about US over-reach.
China Securities Journal:
- China's 4Q Economic Growth May Be Less Than 7%. China's economic
growth in 4Q may be less than 7% because "big" structural changes that
were expected to help growth weren't realized, external demand remains
weak and domestic overproduction can't be absorbed by internal demand,
Wang Jian, a researcher at the National Development and Reform
Commission's China Society of Macroeconomic wrote. Economic growth could
be less than 6% in a "certain quarter" next year, he said. The Chinese
government may be forced to intervene if growth is less than 6%, Wang
said.
Securities Times:
- China's Lower Limit for Growth Misunderstood. China's economic
lower limit points to the pace of growth below which China may see
systemic and regional financial risk, citing Li Zuojun, a researcher at
State Council's Development Research Center. To say that the lower limit
is the 7% economic growth target for the five years through 2015 is
"inaccurate," the report cites Li as saying.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 129.50 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 99.5 +1.25 basis points.
- NASDAQ 100 futures +.45%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:58 am EST
- Preliminary Markit US PMI for July is estimated at 52.6.
10:00 am EST
- New Home Sales for June are estimated to rise to 484K versus 476K in May.
10:30 am EST
- Bloomberg consensus estimates call for a weekly crude oil inventory decline of -2,800,000 barrels versus a -6,902,000
barrel decline the prior week. Gasoline supplies are estimated to rise
by +1,650,000 barrels versus a +3,055,000 barrel increase the prior
week. Distillate inventories are estimated to rise by +1,850,000 barrels
versus a +3,870,000 barrel gain the prior week. Finally, Refinery
Utilization is estimated to fall by -.3% versus a +.4% gain the prior
week.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI report, 5Y T-Note auction, weekly MBA mortgage applications report, (CPB) analyst meeting and the (DELL) shareholder meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and real estate 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.
Click Here for Today's Market Take.
Broad Equity Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.60 +2.52%
- Euro/Yen Carry Return Index 137.12 +.07%
- Emerging Markets Currency Volatility(VXY) 8.77 -2.66%
- S&P 500 Implied Correlation 50.83 +1.72%
- ISE Sentiment Index 75.0 -27.88%
- Total Put/Call .91 -3.19%
Credit Investor Angst:
- North American Investment Grade CDS Index 74.45 +2.61%
- European Financial Sector CDS Index 146.75 +4.1%
- Western Europe Sovereign Debt CDS Index 91.49 -1.62%
- Emerging Market CDS Index 277.54 +2.18%
- 2-Year Swap Spread 17.50 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .02% +1 bp
- China Import Iron Ore Spot $131.90/Metric Tonne +.30%
- Citi US Economic Surprise Index -8.90 +.2 point
- Citi Emerging Markets Economic Surprise Index -29.90 -.6 point
- 10-Year TIPS Spread 2.18 -2 bps
Overseas Futures:
- Nikkei Futures: Indicating +22 open in Japan
- DAX Futures: Indicating +18 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech sector longs and emerging markets shorts
- Disclosed Trades: None
- Market Exposure: 50% Net Long
