Broad Equity Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.69 -1.48%
- Euro/Yen Carry Return Index 136.32 +.18%
- Emerging Markets Currency Volatility(VXY) 10.87 +5.64%
- S&P 500 Implied Correlation 49.62 -4.54%
- ISE Sentiment Index 82.0 -29.91%
- Total Put/Call .93 +3.33%
Credit Investor Angst:
- North American Investment Grade CDS Index 83.10 +1.12%
- European Financial Sector CDS Index 149.94 +2.53%
- Western Europe Sovereign Debt CDS Index 84.82 +1.58%
- Emerging Market CDS Index 338.08 +3.56%
- 2-Year Swap Spread 18.75 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 unch.
Economic Gauges:
- 3-Month T-Bill Yield .03% -1 bp
- China Import Iron Ore Spot $137.80/Metric Tonne -.86%
- Citi US Economic Surprise Index 34.70 +.5 point
- Citi Emerging Markets Economic Surprise Index -32.30 -.8 point
- 10-Year TIPS Spread 2.16 -1 bp
Overseas Futures:
- Nikkei Futures: Indicating -24 open in Japan
- DAX Futures: Indicating +41 open in Germany
Portfolio:
- Higher: On gains in my biotech/tech/medical sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.11% 2) Steel -1.74% 3) Retail -1.64%
Stocks Falling on Unusual Volume:
- IBN,
BOFI, TKC, CVC, HBC, STO, DB, EPAY, CKSW, NGD, GDP, SPLS, AEO, KTCC,
TGT, IFN, NPO, MR, SNY, VNET, PETM, INDY, RRGB, ANGI, DTV, NTES, BOFI,
NTI, AVT, BBRG, ADI, TIF, OMX and CODE
Stocks With Unusual Put Option Activity:
- 1) GDXJ 2) KMI 3) TGT 4) AEO 5) ITB
Stocks With Most Negative News Mentions:
- 1) TUP 2) AGU 3) TGT 4) JPM 5) EEM
Charts:
Style Outperformer:
Sector Outperformers:
- Biotech +.76% 2) Software +.36% 3) REITs +.32%
Stocks Rising on Unusual Volume:
- LOW, INCY, DMND, JKS, CE, CSIQ, YOKU, YELP and TASR
Stocks With Unusual Call Option Activity:
- 1) TGT 2) TASR 3) LOW 4) SPXU 5) EL
Stocks With Most Positive News Mentions:
- 1) INTU 2) GRMN 3) JAZZ 4) LOW 5) IBM
Charts:
Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 157.75 -.75 basis point.
- Asia Pacific Sovereign CDS Index 125.25 +2.5 basis points.
- NASDAQ 100 futures -.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:00 am EST
- Existing Home Sales for July are estimated to rise to 5.15M versus 5.08M in June.
10:30 am EST
- Bloomberg consensus estimates call
for a weekly crude oil inventory decline of -1,500,000 barrels versus a
-2,812,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -1,500,000 barrels versus a -1,169,000 barrel decline
the prior week. Distillate inventories are estimated to rise +1,000,000
barrels versus a +2,027,000 barrel gain the prior week. Finally,
Refinery Utilization is estimated to fall by -.5% versus a -1.5% decline the prior week.
2:00 pm EST
- Fed Minutes from July 30-31 FOMC Meeting.
Upcoming Splits
Other Potential Market Movers
- The HSBC China Flash Manufacturing PMI, weekly MBA mortgage applications report and the Citi MLP/Midstream Infrastructure Conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and technology
shares in the region. I expect US stocks to open mixed and to
weaken into the afternoon, finishing modestly lower. The Portfolio is
25% net long heading into the day.
Click Here for Today's Market Take.
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) 14.95 -.99%
- Euro/Yen Carry Return Index 136.06 +.29%
- Emerging Markets Currency Volatility(VXY) 10.27 -1.53%
- S&P 500 Implied Correlation 52.03 -.25%
- ISE Sentiment Index 118.0 +11.32%
- Total Put/Call .90 -1.10%
Credit Investor Angst:
- North American Investment Grade CDS Index 82.26 -2.37%
- European Financial Sector CDS Index 146.25 +.46%
- Western Europe Sovereign Debt CDS Index 83.50 +1.83%
- Emerging Market CDS Index 326.19 -1.40%
- 2-Year Swap Spread 18.75 -.5 bp
- 3-Month EUR/USD Cross-Currency Basis Swap -9.25 -.25 bp
Economic Gauges:
- 3-Month T-Bill Yield .04% unch.
- China Import Iron Ore Spot $139.0/Metric Tonne -.14%
- Citi US Economic Surprise Index 34.20 -.9 point
- Citi Emerging Markets Economic Surprise Index -31.50 -4.4 points
- 10-Year TIPS Spread 2.17 +3 bps
Overseas Futures:
- Nikkei Futures: Indicating +19 open in Japan
- DAX Futures: Indicating -3 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
Bloomberg:
- Asian Dollar Bond Yields Rise Most in 6 Weeks as Funds Exit Debt. Yields on U.S. dollar-denominated
bonds sold by Asian issuers rose the most in six weeks yesterday
as investors pull cash from the region in favor of more
developed economies. Bond risk climbed. Average rates rose 13 basis points, the most since July 8,
to 5.57 percent yesterday, according to JPMorgan Chase & Co.
indexes. The cost of insuring the region’s corporate and
sovereign bonds against non-payment meanwhile increased to the
highest level in almost six weeks, according to traders of
credit-default swaps.
- India May Delay Capital Infusion Into Banks as Stocks Slump. India may delay injecting capital
into state-run banks due to slumping stock prices, said Rajiv Takru, the Finance Ministry’s banking secretary. The government, which usually infuses capital into lenders
by buying their shares, doesn’t want to lose money as prices
slide, Takru said in an interview yesterday in New Delhi. He had
said on July 9 the government will inject as much as 140 billion
rupees ($2.2 billion) by the end of September to strengthen
banks’ risk buffers and bolster credit growth. The S&P BSE Bankex Index, which tracks 13 banks, has lost
31 percent from a record on May 17 as central bank steps to
support the rupee caused interbank rates to surge.
- UBS Sees Rupee at 70 as Rajan Lacking Magic Wand: India Credit.
Pictet Asset Management SA sees no
immediate policy fix as demand collapses for Indian rupee bonds,
prompting UBS AG to predict a further 10.5 percent slump in the
nation’s currency. Yields on 10-year government securities surged 130
basis points in the past month to a five-year high of 9.24 percent as
global funds cut holdings of local debt to a 19-month low of $28.7
billion on Aug. 13. The rate on similar Chinese notes rose 24 basis
points to 3.93 percent. The rupee has tumbled almost 14 percent since
March and touched an all-time low of 63.23 per dollar yesterday after
the Reserve Bank of India slashed the amount companies and individuals
can invest abroad. “We are not anticipating that India will take
strategic steps that bring sustainable flows in the immediate term,”
Philippe Petit, a Singapore-based senior investment manager at
Pictet, which manages $30 billion of emerging-market debt, said
in an interview on Aug. 16. “The aim should be to accelerate
inflows rather than curb outflows. The measures won’t
significantly ease the current account situation.”
- Rupee Drops to Record. India’s
rupee plummeted past 64 per dollar for the first time on concern
foreign outflows will accelerate as the Federal Reserve prepares to trim
stimulus. Overseas funds have pulled about $12 billion from local
debt and equities since May 22 when Fed Chairman Ben S. Bernanke
first signaled the central bank may pare its $85 billion monthly
bond-buying program. The rupee, which sank as much as 1.5 percent to touch an
unprecedented 64.12 a dollar, pared most of the losses on
speculation the Reserve Bank of India intervened to arrest the
slide, said two traders with knowledge of the matter, asking not
to be named as the information isn’t public. It ended the day at
63.23.
- Indonesia Stocks Drop for Fourth Day as Outflows Weaken Rupiah. Indonesian
stocks tumbled, capping
the biggest four-day plunge since 2011, amid growing concern
that capital outflows will accelerate. The rupiah dropped to the
weakest level in four years. The Jakarta Composite Index (JCI) fell 3.2
percent to 4,174.98, extending its four-day slide to 11 percent. The
gauge has
dropped 19.9 percent from its record close on May 20. The rupiah
fell 1.8 percent to 10,685 per dollar after reaching 10,728
earlier, the weakest level since April 2009, prices from local
banks show. The cost to insure Indonesian debt against default
rose to an almost two-year high yesterday, according to CMA. Five-year credit-default swaps insuring the Southeast Asian nation’s debt against default rose 43 basis points to 283 yesterday, according
to CMA.
- Thousands of Syrians Surge Into Iraq to Escape Collapse at Home. An economic collapse fueled by
bombings is pushing tens of thousands of Syrians to cross into
neighboring Iraq in the largest exodus since Syria’s civil war
erupted more than two years ago, the United Nations refugee
agency said. A group of 2,000 to 3,000 people is expected to cross into
northern Iraq today, following about 30,000 others who have made
the same trip since Aug. 15, Dan McNorton, a spokesman for the
UN High Commissioner for Refugees, told reporters today in
Geneva, according to an agency e-mail summarizing his comments.
- Bond Risk Climbs to Five-Week High in Europe on Tapering Concern. The cost of insuring corporate bonds
against losses rose for a second day in Europe on investor
concern the Federal Reserve will start curbing asset purchases
as soon as next month. The Markit iTraxx Europe Index of
credit-default swaps on
125 companies with investment-grade ratings gained 1.2 basis
points to 104 basis points at 9:11 a.m in London, the highest level
since July 17. The average yield on the debt climbed 4 basis points to a
six-week high of 2.1 percent, according to Bloomberg bond index data.
- Crude Drops for Second Day on Fed Tapering Speculation. West Texas Intermediate crude fell
for a second day amid speculation that the Federal Reserve will reduce stimulus measures next month, curbing investors’ appetite
for commodities. WTI for September delivery dropped 77 cents, or 0.7
percent, to $106.33 a barrel at 1:12 p.m. on the New York Mercantile
Exchange. It slipped 0.3 percent yesterday, snapping a six-day rally
that was the longest since April 25.
- Bubbles Bloom Anew in Desert as Buyers Wager on Las Vegas.
A five-bedroom house in Las Vegas sold in mid-July for $499,000, double
the price it went for three months ago. In Phoenix, a similar house
sold this month for $600,000, gaining $273,000 since March. Bubbles
are inflating in Nevada and Arizona even as housing in the rest of the
country recovers at a more sustainable pace. Gains in the two desert
cities are the biggest since the height of the real estate boom, just
before their plunge to the bottom of the national housing collapse.
This year, Las Vegas and Phoenix have topped the nation in price
increases, according to the S&P/Case-Shiller property-value
index. “They’re clearly in bubbles,” said Karl Case, one of the
creators of the index. “What can go up can go down -- real quick.” In
May, Phoenix prices jumped 21 percent and in Las Vegas, they rose 23
percent from a year earlier. Nationally, home prices were up 12 percent
from a year ago, the most since the beginning of 2006, according to the S&P/Case-Shiller index of 20 cities.
- BHP(BHP) Second-Half Profit Drops After Prices Slump, Slowing Growth. BHP Billiton Ltd. (BHP), the world’s biggest mining company, had a 6.9 percent drop in second-half
profit after growth in emerging economies slowed and metal
prices fell.
Profit, excluding one-time items, was $6.7 billion in the
six months to June 30, from $7.2 billion a year ago, according
to Bloomberg calculations. That missed a median forecast of $6.8
billion of seven analysts surveyed by Bloomberg.
- Home Depot(HD) Profit Tops Analysts’ Estimates on Housing. Net income in the quarter ended Aug. 4 advanced 17 percent to $1.8 billion, or $1.24 a share, from $1.53 billion, or $1.01,
a year earlier, the Atlanta-based company said today in a
statement. Analysts projected $1.21, the average of 25 estimates
in a Bloomberg survey.
Wall Street Journal:
- TransUnion: U.S. Auto Loan Delinquency Rate Slightly Higher in 2nd Quarter. The U.S. auto-loan delinquency rate rose slightly in the second quarter from
the same period a year ago, with delinquencies for subprime buyers remaining
somewhat flat, according to TransUnion. The credit-information company said the percentage of auto-loan accounts at
least 60 days past due moved up to 0.8% in the second quarter from 0.79% a year
ago, and was down from 0.88% in the first quarter. Average auto-loan account balances jumped 4% to $13,435 from $12,875 a year
earlier, with every state other than Michigan experiencing an increase in
average balances during the period. Even as subprime debt increased more than 7% in the past year, delinquencies
for subprime borrowers edged up to 5.02% from 4.94% last year. Delinquencies
also dropped from 5.5% from the first quarter.
Fox News:
MarketWatch:
- National activity index less negative in July. The national activity index produced by the Chicago Fed rose to a
negative 0.15 reading in July from negative 0.23 in June, and the
three-month average did virtually the same, rising to negative 0.15 from
negative 0.24 in June, the regional central bank said Tuesday. The
three-month average has been below zero for five straight months.
CNBC:
- Banks are falling short in planning for the worst, Fed says. Most large banks appear to have been sailing through the annual
"health checkups" they have had to undergo since the financial crisis. But on Monday, the Federal Reserve described some significant shortcomings in the banks' responses to the so-called stress tests.
Zero Hedge:
Business Insider:
New York Times:
- New Chinese Agency to Increase Financial Coordination. The Chinese authorities said Tuesday that they would set up a group to
coordinate financial regulation, in an apparent attempt to reduce risk
and wean the economy off of easy credit and steer it toward slower, more
sustainable expansion.
Reuters:
- S&P maintains negative outlook on India's rating. Standard & Poor's maintains its negative outlook on India's BBB- sovereign
credit rating, the rating agency said in an emailed response to Reuters on
Tuesday. Recent measures taken to restrict capital outflows have increased uncertainty
among foreign and domestic investors, said Kim Eng Tan, senior director,
sovereign and international public finance, Asia Pacific at S&P. "If the uncertainty continues, business financing conditions could
deteriorate further and investment growth could slow further," Tan
said. "India's long term growth prospects could weaken on a sustained basis, with
negative implications for the sovereign credit fundamentals," he said. "It is, however, too early now to tell if this scenario will come to pass.
This will be largely dependent on policymakers' reactions to these latest
developments," Tan said. India has the lowest investment grade rating and S&P is the only agency
which has a negative outlook while Moody's and Fitch have a stable outlook on
India.
- Tight cost controls boost Best Buy's(BBY) profit. Best Buy Co Inc (BBY.N) reported its first quarterly profit in a year after keeping a tight lid on costs, further confirming that Chief Executive Officer Hubert Joly's
turnaround plan for the world's largest consumer electronics chain is
working.
- Global steel output up in July on US, Chinese increases.
Global crude steel production rose in July as a recent price upturn
helped boost output in top producer China and in the United States,
while suffering European steelmakers continued to curb volumes. World production rose 2.7 percent to 132 million tonnes in July from the same month a year ago, figures from industry body the World Steel Association showed on Tuesday.
Financial Times:
- Asia’s debt conundrum reawakens ghosts of 1990s crisis.
When China unleashed the largest stimulus package in its history in
response to the 2008 crisis and slowing export markets in the west, it
came at a price. Today China is grappling with a bill that some
economists say has driven total debt to gross domestic product past 200
per cent. While China offers the most extreme example of using debt to
fund growth, it is a pattern that has been repeated across Asia.
Without exports, central banks turned on the taps, leading to a jump in
household and corporate borrowing.
Telegraph:
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
Valor Economico:
- Brazil Concerned About Losing Control of Currency. Govt's
economic team is more concerned about possibility of BRL falling to
2.5/dollar or 2.70/dollar than potential pass-through of FX depreciation
to inflation, columnist Claudia Safatle reports. Govt expects effect of
FX depreciation on domestic prices to be partly neutralized by economic
slowdown, which makes it harder for cos. to adjust prices.
- Brazil's Figueiredo Says Swap Rates May Cause Recession.
