Style Outperformer:
Sector Outperformers:
- 1) Networking +1.05% 2) Biotech +.94% 3) Homebuilders +.74%
Stocks Rising on Unusual Volume:
- FRGI, VNDA, ONVO, A, FENG, YOKU, IRM, MJN, IOC, AWAY, EQIX, XON, LGND, MDRX, INFI, P, BMRN, IRM, RPTP and LNKD
Stocks With Unusual Call Option Activity:
- 1) NIHD 2) ONVO 3) IRM 4) WU 5) SPLS
Stocks With Most Positive News Mentions:
- 1) BA 2) XOM 3) T 4) WMT 5) AAPL
Charts:
Evening Headlines
Bloomberg:
- Japan’s Biggest Banks See Profit Declining in Second Half.
Mitsubishi UFJ Financial Group Inc. (8306), Sumitomo Mitsui Financial
Group Inc. (8316) and Mizuho Financial Group Inc. (8411) increased their
combined net income target by 23 percent to 2.26 trillion yen ($23
billion) for the year ending March, company statements showed. If they
achieve the goal, second-half profit will fall 46 percent to 794.3
billion yen from the first six months’ 1.47 trillion yen and drop 43
percent from a year earlier. The forecast for lower second-half
earnings reflects the banks’ uncertainty over whether Prime Minister
Shinzo Abe can sustain an economic recovery that’s been driven by
government spending and a weaker yen.
- Asian Stocks Advance as Yellen Supports U.S. Stimulus.
Asian stocks rose, with Japan’s Nikkei 225 Stock Average surging beyond
15,000 for the first time since May, after Federal Reserve chairman
nominee Janet Yellen signaled she will continue U.S. stimulus efforts.
Toyota Motor Co. (7201) climbed 1.3 percent, extending this week’s rally
to 2.9 percent, as the yen declined to a two-month low against the
dollar, boosting the earnings outlook for Japanese exporters. Dai-ichi
Life Insurance Co. surged 3.7 percent in Tokyo after the insurer raised
its profit forecast. Luk Fook Holdings (International) Ltd. climbed 7.1
percent in Hong Kong as the jewelry retailer said it expects profit will
rise. The MSCI AsiaPacific Index added 1.2 percent to 141.32 as
of 10:51 a.m. in Hong Kong, extending this week’s advance to 1.7
percent.
- Rebar Rises in Shanghai to Trim Weekly Loss as Iron Ore Rallies.
Steel reinforcement-bar futures in Shanghai advanced, narrowing a
weekly loss, as higher iron ore prices helped offset a weaker demand
outlook in winter. Rebar for May delivery, the most-active contract on the Shanghai Futures Exchange, gained as much as 0.4 percent to
3,636 yuan ($597) a metric ton, before trading at 3,632 yuan at
10:28 a.m. local time. The contract lost 0.8 percent this week.
- Copper Pares Weekly Drop as Yellen Signals Continued Stimulus.
Copper rose for a second day, paring a weekly decline, after Federal
Reserve Chairman nominee Janet Yellen backed U.S. stimulus measures
until the economy improves. The contract for delivery in three months on
the London
Metal Exchange rose as much 0.6 percent to $7,035.25 a metric
ton and traded at $7,029.25 at 10:17 a.m. in Beijing. The two-day rebound helped trim this week’s loss to 1.9 percent.
- Germany Digs in Against Risk Sharing in EU Bank-Failure Debate. Germany
argued against a joint
backstop for struggling euro-area banks as European finance
ministers renewed their debate on how to handle the costs of managing
failed lenders. German Finance Minister Wolfgang Schaeuble called on his
colleagues to rein in their ambitions for the Single Resolution
Mechanism proposed by the European Commission, which includes a
common fund filled by levies on the financial industry. He said
an agreement among European Union member states is possible by
year-end as long as they don’t insist on a European fund now.
- Big Banks’ Use of Bailouts Show Need for New Rules, Senators Say. Big
banks’ disproportionate reliance
on U.S. aid after the credit crisis reinforces the need for additional
steps to ensure the end of too big to fail, Senators Sherrod Brown and
David Vitter said today. Brown and Vitter, co-sponsors of a bill that would impose a 15 percent capital requirement on the biggest U.S. lenders,
commented after the release of a Government Accountability
Office study that showed such firms made greater use of bailout
programs introduced after markets collapsed in 2008.
- Under Armour(UA) Buying MapMyFitness in $150 Million Deal. Under
Armour Inc. (UA) agreed to buy MapMyFitness Inc. for $150 million as
the maker of athletic apparel looks to compete with Nike Inc. (NKE) in
offering fitness buffs a way to measure their training and performance
online. MapMyFitness, founded in 2007, designs applications that
allow athletes to record and share their workouts using global-positioning technology, according to a statement from Under
Armour. Closely held MapMyFitness has about 20 million
registered users worldwide, who can measure their training on
more than 400 devices, sensors and wearables.
- Yellen Says Review of Bank Commodity Activity Could Bring Limits. The Federal Reserve may consider
limits on bank ownership and trading of physical commodities out
of concern that an event such as an oil spill could undermine
financial stability. “We are involved in a very comprehensive review” of
banks’ commodities activity, Fed Vice Chairman Janet Yellen said
today at a Senate hearing on her nomination to become chairman
of the central bank. “We want to make sure that these are
conducted in a safe and sound manner, and we may be involved in
additional rulemaking as we complete this review.”
- Japan Sets Emissions Target in Setback to UN Treaty Talks. Japan set a new target for greenhouse gas emissions that critics say will set back United
Nations talks for a treaty limiting fossil fuel emissions. The new target effectively reverses course from the goal
set four years ago by allowing a 3.1 percent increase in
emissions from 1990 levels rather than seeking a 25 percent cut.
Wall Street Journal:
- CIA's Financial Spying Bags Data on Americans. Information on International Money Transfers Includes Financial and Personal Data of Americans. The
Central Intelligence Agency is building a
vast database of international money transfers that includes millions
of Americans' financial and personal data, officials familiar with the
program say. The program, which collects information from U.S.
money-transfer companies including Western Union, WU -0.34% is carried
out under the same provision of the Patriot Act that enables the
National Security Agency to collect nearly all American phone records,
the officials said. Like the NSA program, the mass collection of
financial transactions is
authorized by a secret national-security court, the Foreign Intelligence
Surveillance Court.
- NSA Fallout: Tech Firms Feel a Chill Inside China. Big U.S. computer and software companies are
reporting a sudden chill in sales to China, and some blame increased
government hostility toward the U.S. In the latest sign,
computer-networking-gear maker Cisco Systems Inc. CSCO -10.96% said
Wednesday that orders from China in the latest quarter fell 18% from the
same period a year earlier. Cisco further projected revenue
world-wide would decline 8% to 10% in the current quarter, in part
because of continued weakness in China.
Barron's:
Fox News:
CNBC:
- Holiday outlook bleak for Wal-Mart(WMT), Kohl's(KSS). This holiday season may not be one of joy for some big retailers as the
aftermath of the recession—low job growth and higher payroll taxes—has
lower-income shoppers struggling to make ends meet and cautious about
splashing out.
Zero Hedge:
Business Insider:
NY Times:
- U.S. Investigates Currency Trades by Major Banks. From their desks at some of the world’s biggest banks, traders
exchanged a series of instant messages that earned them the nickname
“the cartel.” Much like companies that rigged the price of vitamins and animal
feed, the traders were competitors that hatched alliances for their own
profits, federal investigators suspect. The group of traders, the investigators say, shared a mission to
alter the price of foreign currencies, the largest and yet least
regulated market in the financial world. And ultimately, they flooded
the market with trades that potentially raised the cost of currency for
clients but aided the banks’ own investments.
IFR:
- Hunt for yield reaches fever pitch. Investors and bankers last week shrugged off concerns of a credit
bubble forming and insisted that bumper supply volumes were unlikely to
diminish before the end of the year, with issuers keen to pre-empt
macroeconomic risks and make use of welcoming market conditions. Since
the beginning of October, issuance in the euro and sterling markets by
high-yield, corporate and financial institutions has reached US$115bn,
according to Thomson Reuters data, just US$22bn short of the total
issued in both October and November last year.
Real Clear Politics:
Reuters:
- Nordstrom(JWN) tempers 2013 same-store sales view, stock down. Nordstrom Inc on Thursday reported a lower quarterly profit, due in part to the earlier timing of its Anniversary Sale, and took down the top end of its
full-year forecast for sales at established stores.
Nordstrom shares fell 1.7 percent to $62.36 in extended
trading.
Financial Times:
- Hopes for faster global growth dashed. Disappointing
growth figures in the eurozone and Japan driven by weak export numbers
have dashed hopes that a global economic recovery would gather pace in
the second half of the year.
Telegraph:
Evening Recommendations
Stifel:
- Rated (LNKD) Buy, target $300.
- Rated (YELP) Buy, target $85.
Night Trading
- Asian equity indices are +.25% to +1.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 134.0 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 107.50 -4.0 basis points.
- NASDAQ 100 futures +.19%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Empire Manufacturing for November is estimated to rise to 5.0 versus 1.52 in October.
- The Import Price Index for October is estimated to fall -.5% versus a +.2% gain in September.
9:15 am EST
- Industrial Production for October is estimated to rise +.2% versus a +.6% gain in September.
- Capacity Utilization for October is estimated at 798.3% versus 78.3% in September.
- Manufacturing Production for October is estimated to rise +.2% versus a +.1% gain in September.
10:00 am EST
- Wholesale Inventories for September are estimated to rise +.4% versus a +.5% gain in August.
Upcoming Splits
Other Potential Market Movers
- The Eurozone GDP/Germany IFO, Eurozone CPI and the (GE) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted 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 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.32 -1.60%
- Euro/Yen Carry Return Index 140.39 +.60%
- Emerging Markets Currency Volatility(VXY) 8.87 -2.21%
- S&P 500 Implied Correlation 33.70 -6.26%
- ISE Sentiment Index 144.0 +23.08%
- Total Put/Call .83 +2.47%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.03 +.02%
- European Financial Sector CDS Index 109.13 -.34%
- Western Europe Sovereign Debt CDS Index 62.33 -2.61%
- Emerging Market CDS Index 291.85 -2.26%
- 2-Year Swap Spread 11.0 unch.
- TED Spread 16.75 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -2.75 +.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .07% unch.
- Yield Curve 241.0 -1 basis point
- China Import Iron Ore Spot $136.60/Metric Tonne +.37%
- Citi US Economic Surprise Index 11.50 -6.5 points
- Citi Emerging Markets Economic Surprise Index -12.10 +3.8 points
- 10-Year TIPS Spread 2.19 +1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +219 open in Japan
- DAX Futures: Indicating -7 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and (EEM) short
- Market Exposure: Moved to 75% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Networking -2.81% 2) Coal -1.76% 3) Education -1.73%
Stocks Falling on Unusual Volume:
- CSCO, CRAY, XLNX, CTXS, CIEN, WGL, CAVM, TTS, EPZM, MGAM, GWR, KSS, PRCP, SEAS, AFCE, SDT, WGL, ALGN, SFUN, PEGA, RNR, NTES, FNSR, AVGO, VIAB, BWC, LMIA, PAMT, EZCH and LULU
Stocks With Unusual Put Option Activity:
- 1) MJN 2) LOW 3) XLF 4) XLV 5) ORCL
Stocks With Most Negative News Mentions:
- 1) KSS 2) TTS 3) NTES 4) FFIV 5) LULU
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.96% 2) Gold & Silver +1.97% 3) Steel +1.09%
Stocks Rising on Unusual Volume:
- SFI, GOGO, ONVO, TTEK, SRPT, HFC, SNE, CLNE, XONE, NTI, MPC and WNR
Stocks With Unusual Call Option Activity:
- 1) VIAB 2) DDS 3) FOXA 4) HCA 5) SD
Stocks With Most Positive News Mentions:
- 1) T 2) WMT 3) MCD 4) CPWR 5) AAPL
Charts:
Evening Headlines
Bloomberg:
- Local $1.6 Trillion Debt Pile Impedes Rate Freedom: China Credit. Chinese local governments’ $1.6 trillion in bank borrowings are a
major obstacle to the freeing up of interest rates in the world’s
second-largest economy, according to BNP Paribas SA and Capital
Economics Ltd. The financing arms of municipal authorities owed
lenders 9.7 trillion yuan ($1.6 trillion), or 14 percent of all loans,
in mid-2013, according to China Banking Regulatory Commission figures.
Most have weak credit profiles, Moody’s Investors Service said in a Nov.
5 report, noting that only 53 percent of 388 such companies it surveyed
in June had enough cash to cover estimated debt payments and interest
this year without refinancing.
- China Banks Pay Most for State Funds in Six Months; Swaps Rise. Chinese lenders paid the highest
rate of interest since June to borrow government funds today, a
sign cash supply in the banking system is waning. The seven-day
repurchase rate, a gauge of funding availability in the banking system,
climbed 44 basis points, or 0.44 percentage point, to 4.18 percent as of
10:44 a.m. in Shanghai, according to a weighted average compiled by the
National Interbank Funding Center. It reached 4.50 percent
earlier, the highest level since Nov. 1.
- Nomura’s Akedo Sees Stock Drop Unless Investors Convinced. Japan’s
Nikkei 225 Stock Average could fall to 12,000 if the government doesn’t
do more to persuade global investors that efforts to boost the economy
will succeed, Nomura Holdings Inc. (8604)’s head of Japan equities said.
“Worldwide investors are breathlessly watching the future of Japan,”
Norikazu Akedo, who oversees equity sales and trading at the nation’s
largest brokerage, said in a Nov. 12
interview.
- Australia Faces Debt Ceiling Impasse as Hockey Warns of Cuts. Australia faces “massive” public
spending cuts if the upper house Senate blocks government
efforts to increase the nation’s debt ceiling to A$500 billion
($468 billion), Treasurer Joe Hockey said. The Liberal-National coalition government says the current
A$300 billion limit will be breached next month, and is seeking
Senate approval for the increase after legislation was approved
by the lower house yesterday. The opposition Labor party has
indicated it will block the law, saying an increase to A$400
billion is sufficient. “If Labor prevents an increase in the debt limit, there is
no choice but to have massive cuts to government expenditure,”
Hockey said in an Australian Broadcasting Corp. interview today.
“The government is running on borrowed money.”
- Asian Stocks Gain With Metals on Yellen as Yen Declines.
Asian stocks climbed the most in a
month while metals gained after Federal Reserve chairman nominee Janet
Yellen signaled stimulus will be maintained until the U.S. economy
improves. The yen dropped for the fourth time in five days against the
dollar. The MSCI Asia Pacific Index added 1.1 percent at 1 p.m. in Tokyo as Japan’s Topix Index rose to a three-week high.
- Rebar Declines for Second Day in Shanghai as Spot Trading Slows.
Steel reinforcement-bar futures in Shanghai fell for the second day
amid waning trading in the spot market and as construction slowed
because of winter weather in northern China. Rebar for May delivery,
the most-active contract on the Shanghai Futures Exchange, fell as much
as 0.7 percent to 3,620 yuan ($594) a metric ton and traded at 3,628 yuan at 10:57 a.m.
local time.
Wall Street Journal:
- Yellen: Economy Still Needs Fed Aid. The
U.S. economy has grown "significantly
stronger" since the 2008 financial crisis and ensuing recession, and but
it still needs help from the Federal Reserve as it continues to mend,
Janet Yellen will tell senators Thursday. Ms. Yellen, who has been nominated to be the Fed's next leader, is set to
speak before the Senate Banking Committee in her confirmation hearing. "We
have made good progress, but we have farther to go to regain the ground
lost in the crisis and the recession," Ms. Yellen, the Fed vice
chairwoman, will say in her opening statement, according to her prepared
remarks released Wednesday.
- Fundraising Rules Murky Despite JOBS Act. Ban on Ads Ends, but Small Firms Hold Back. When U.S. securities regulators lifted a long-standing ban on
advertising to wealthy investors in September,
Smári Ásmundsson
hoped it would clear the way for him to pitch investments in his
Icelandic yogurt company on Facebook and his own website.
- Obama Open to Health-Law Change. Democrats Raise Pressure as New Figures Show Enrollment Far Short of Forecasts; House Vote Due Friday.
The government released numbers Wednesday
showing that far fewer Americans had enrolled in private insurance plans
under the new health law than expected and, in a marked shift, the
Obama administration signaled it was open to legislation to fix the
troubled rollout. The move came as the administration faced mounting dissatisfaction from Democrats over the law's implementation. New administration figures showed that only 26,794 people nationwide had enrolled in a private health plan through the balky online federal marketplace in its first month—far short of projections.
Fox News:
- Details emerge about Americans badly injured in Benghazi attack. In addition to the four Americans killed in the Benghazi terror
attack last year, at least two other Americans were severely injured in
the fighting that night, Fox News has learned. The injuries were sustained by U.S. personnel after mortars struck
the CIA annex rooftop they were defending. Fox News is told that one
former government contractor -- who is expected to testify this week
along with four other contractors in classified sessions on Capitol Hill
-- has had multiple surgeries since the attack and has still not
regained full use of one arm.
CNBC:
- Expect taper in the next couple of months: Morgan Stanley(MS). (video) A tapering in the U.S. Federal Reserve's massive stimulus is the right
thing to do against the backdrop of a recovery economy and a scaling
back of the stimulus program can be expected in the next couple of
months, Morgan Stanley Chairman and CEO James Gorman told CNBC on
Thursday.
Zero Hedge:
- Something Is Very Wrong With This Picture. (graph) Just because very few actually understood the severity of the Cisco
earnings guidance, in which the company forecast an 8-10% drop (let's
call it 9%) in quarterly revenues when Wall Street was expecting a 4%
increase, we have compiled and presented in chart form the historical
and projected quarterly revenue data for CSCO to show today's
preannouncement in all its gruesome context. A few points:
Business Insider:
NY Post:
- Got ObamaCare? Too bad for you. Uncle Sam will spend $2.6 trillion on ObamaCare over the next 10
years, according to the Congressional Budget Office. What’s remarkable
is how few people this will leave better off. The middle class is a clear loser: It gets squeezed, since these
people earn too much to qualify for adequate subsidies, but too little
to afford the needlessly pricey exchange coverage.
Reuters:
- Not so happy birthday: Abenomics ages, challenges remain.
A year after Prime Minister Shinzo
Abe took financial markets by storm with promises to revive the moribund
Japanese economy, data showed growth slowed sharply and that his "Abenomics" policy mix is yet to secure a durable recovery.
Growth in the world's third-biggest economy decelerated in the third
quarter after leading the Group of Seven industrial powers in the first
half of the year, as capital spending, personal consumption and exports
moderated. GDP expanded at an annualised clip of 1.9 percent in the
July-September quarter, slightly faster than expected by markets but
still sharply slower than 3.8 percent growth in April-June
and 4.3 percent in the first quarter.
- Cisco(CSCO) warns of big second quarter revenue drop, shares fall. Network equipment
maker Cisco Systems Inc warned that its revenue would decline between 8
percent and 10 percent in its second fiscal quarter, sending its shares
down almost 10 percent in late trade. Chief Executive John Chambers
blamed weak demand in emerging markets such as China, saying companies
there have become more hesitant to buy Cisco products due because of
political repercussions from leaks about the United
States spying on foreign governments.
Financial Times:
- ECB's
Draghi Was Wrong to Reduce Rates, Ifo's Sinn Writes. ECB should aim to
offset deflation in Greece, Spain, Portugal by inflating northern euro
area, Hans-Werner Sinn, head of German economic institute Ifo, writes in
FT opinion piece. Restraint needed rather than activism to achieve
that. More conventional monetary policy may give markets better change
of fixing imbalances, Sinn writes.
Evening Recommendations
Night Trading
- Asian equity indices are +.50% to +1.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 138.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 111.50 +.5 basis point.
- NASDAQ 100 futures -.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 330K versus 336K the prior week.
- Continuing Claims are estimated to rise to 2870K versus 2868K prior.
- Preliminary 3Q Non-farm Productivity is estimated to rise +2.2% versus a +2.3% gain in 2Q.
- Preliminary 3Q Unit Labor Costs are estimated to fall -.1% versus unch. in 2Q.
- The Trade Deficit for September is estimated to widen to -$39.0B versus -$38.8B in August.
11:00 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+595,000 barrels versus a +1,577,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -550,000 barrels versus a
-3,755,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -947,000 barrels versus a -4,899,000 barrel decline
the prior week. Finally, Refinery Utilization is estimated to rise +.6% versus a -.5% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The Fed's Yellen speaking, Fed's Plosser speaking, UK retail sales, EuroGroup meetings, Eurozone Q3 GDP, Italy 10Y bond auction, 30Y bond auction, weekly EIA natural gas inventory report, Canaccord Med Tech Conference, Goldman Emerging/SMID Cap Growth Conference, (FFIV) analyst meeting, (ALK) investor day and the (ROK) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by industrial and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
