Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 12.61 -5.90%
- Euro/Yen Carry Return Index 141.96 +1.24%
- Emerging Markets Currency Volatility(VXY) 8.77 +1.15%
- S&P 500 Implied Correlation 56.16 -4.12%
- ISE Sentiment Index 216.0 +87.83%
- Total Put/Call .77 -18.95%
Credit Investor Angst:
- North American Investment Grade CDS Index 70.97 -2.03%
- European Financial Sector CDS Index 106.05 -.11%
- Western Europe Sovereign Debt CDS Index 62.50 +.26%
- Emerging Market CDS Index 295.01 -1.34%
- 2-Year Swap Spread 10.50 unch.
- TED Spread 16.75 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -2.25 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .07% -1 basis point
- Yield Curve 251.0 -1 basis point
- China Import Iron Ore Spot $136.30/Metric Tonne -.07%
- Citi US Economic Surprise Index 7.0 +.1 point
- Citi Emerging Markets Economic Surprise Index -14.10 +.8 point
- 10-Year TIPS Spread 2.20 +3 basis points
Overseas Futures:
- Nikkei Futures: Indicating +215 open in Japan
- DAX Futures: Indicating +12 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/tech/retail/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- China’s Bribery Culture Poses Risks for Multinationals. To the risks of doing business in China -- an authoritarian
government, sprawling market, worsening pollution -- add another one:
running afoul of local and U.S. anti-corruption laws. Multinational
companies are working to navigate bribery risks in China, where possible
corruption by JPMorgan Chase & Co., GlaxoSmithKline Plc and
Avon Products Inc. have sparked probes by the U.S. or Chinese
authorities.
- Indonesia Pain Threshold Looms on Rate Increases: Southeast Asia. Indonesia’s
most aggressive rate-tightening in eight years has barely dented a
current-account deficit, prompting calls for more increases and other
measures before the Federal Reserve cuts stimulus.Bank Indonesia has
raised borrowing costs by 1.75 percentage points to 7.5 percent since
mid-June, the quickest
since 2005. Following data last week showing the country
recorded its second-highest current-account shortfall on record
in the three months through September, JPMorgan Chase & Co. and
Standard Chartered Plc now see a further 50 basis points of
increases in the first half of next year.
- Draghi Says ECB Aware of Concern Low Rates Risk to Stability.
European Central Bank President Mario Draghi said keeping interest
rates low for an extended period carries risks that policy makers
weighed carefully before they reduced the benchmark rate to a record
low. “I am of course aware that our rate cut raised some
concerns,” Draghi said in a speech in Berlin today. “A
protracted period of time of low rates creates the scene for
risks in financial stability.”
- Snai Plans Euro Bonds as Junk Borrowing Costs Fall Below 5%. Snai SpA (SNA), an Italian betting website operator, is meeting investors for the company’s debut sale of
high-yield bonds in euros as junk borrowing costs dropped to a
record 4.99 percent. Snai is planning to sell 300 million euros ($403 million)
of senior secured notes and 160 million euros of senior
subordinated notes, according to a person familiar with the
matter. The average yield investors demand to hold junk-rated
debt fell 12 basis points this month, Bank of America Merrill
Lynch index data show. Borrowers are benefiting from record low central bank
rates, which are encouraging investors to take on more risk as
default rates approach historic lows. Investors placed $19
billion in European high-yield credit funds this year, compared
with $771 million in investment grade, according to a Bank of
America Corp. report this month, citing EPFR Global data.
- Europe Stocks Slip After Fed Talks, China Manufacturing.
European shares declined as a gauge of China manufacturing dropped more
than forecast and minutes from the Federal Reserve’s last meeting
signaled the U.S. may reduce stimulus in coming months. Atos (ATO) fell
4.1 percent after an investor cut its stake in the company. Intermediate
Capital Group Plc (ICP) lost 3.4 percent after Numis Securities Ltd.
lowered its rating on the money manager. Allianz SE (ALV) fell 1.3
percent after Europe’s biggest insurer was cut to neutral at Citigroup
Inc. Johnson Matthey Plc (JMAT) climbed 3.8 percent after reporting a
profit increase in the
first half of the year. The Stoxx Europe 600 Index lost 0.2 percent to 322.42 at
the close of trading.
- WTI Crude Advances. WTI for January delivery climbed $1.59, or 1.7 percent, to $95.44 a barrel at 1:11 p.m. on the New York Mercantile Exchange. Prices settled at $93.03 on Nov. 18, the lowest settlement since May 31. The volume of all futures traded was
9.4 percent lower than the 100-day average.
- Highbridge's Dubin Says Commodity Supercycle May Be Over.
Supercycle is over and market now trading on supply/demand
characteristics: Highbridge's Glenn Dubin says on BTV. TXU, OGX has
"dangerous mix" of volatility, leverage. "Hot new thing" is behind
commodity markets.
- Stock Funds Lure Most Cash in 13 Years as Investors Chase Rally. Investors are pouring more money
into stock mutual funds in the U.S. than they have in 13 years,
attracted by a market near record highs and stung by bond losses
that would deepen if interest rates keep rising. Stock funds won $172 billion in the year’s first 10 months,
the largest amount since they got $272 billion in all of 2000,
according to Morningstar Inc. estimates. Even with most of the
cash going to international funds, domestic equity deposits are
the highest since 2004. “The timing of retail investors tends to be terrible,”
said Jonathan Pond, an independent financial adviser in Newton,
Massachusetts, who oversees $200 million. The deposits may be a
contrarian indicator of a market near a top, he said.
Fox News:
- Senate Dems weaken GOP power with major filibuster rule change. Senate Democrats bowled over Republicans on Thursday to win approval
for a highly controversial rule change which would limit the GOP's
ability to block nominees, in a move Republicans called a "raw power
grab." "It's a sad day in the history of the Senate," Minority Leader Mitch McConnell, R-Ky., said after the vote. Majority Leader Harry Reid, D-Nev., moving quickly following days of
speculation, used the so-called "nuclear option" to pass the change.
Typically, major changes like this take 67 votes, but he did it with
just a simple majority.
Zero Hedge:
Business Insider:
AL.com:
Reuters:
- Toyota sees U.S. industry growth slowing by half in 2014. The United States
automotive industry will move into the slow lane in 2014 as fewer buyers
replace aging vehicles and growth drops to half this year's rate, the head of Toyota Motor Corp's North American operations said on Wednesday.
Style Underperformer:
Sector Underperformers:
- 1) Steel -1.60% 2) Coal -1.40% 3) Gold & Silver -1.11%
Stocks Falling on Unusual Volume:
- TGT, PM, DLTR, AL, LGND, GME, GBX, TRN, ARII, LQDT, FOR, GNT, WBMD, ARPI, GIL, SMRT, SI, PRXL, NHI, SQM, RIG, TSM, BTI, QCOR and KOF
Stocks With Unusual Put Option Activity:
- 1) CVA 2) CTSH 3) JCI 4) ETFC 5) GMCR
Stocks With Most Negative News Mentions:
- 1) GE 2) TGT 3) CLF 4) GBX 5) TRN
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +1.65% 2) Defense +1.41% 3) I-Banks +1.39%
Stocks Rising on Unusual Volume:
- CSII, ENT, GMCR, WSM, JCI, DDD, NUS, WTI, DCI, IGT and SSYS
Stocks With Unusual Call Option Activity:
- 1) TWTR 2) GMCR 3) GME 4) STZ 5) EMN
Stocks With Most Positive News Mentions:
- 1) DLTR 2) GMCR 3) TWTR 4) TSLA 5) HOLX
Charts:
Evening Headlines
Bloomberg:
- PBOC Says No Longer in China’s ‘Favor’ to Boost Record Reserves.
The People’s Bank of China signaled
it no longer benefits China to increase its foreign currency
reserves that now exceed a record $3.7 trillion. “It’s no longer in
China’s favor to accumulate foreign-exchange reserves,” Yi Gang, a
deputy governor with the
People’s Bank of China said in a speech organized by China
Economists 50 Forum at Tsinghua University yesterday. “The
marginal cost of accumulating foreign-exchange reserves has
exceeded the marginal gains.”
- China, India Push Rich Countries to Move First on Climate Change. China and India are stepping up pressure on "wealthy countries" to move first on fighting global warming, saying the earliest industrialized nations are the most to blame for rising temperatures.
Speaking at talks involving 190 nations that aim to forge a new treaty
to limit greenhouse gas emissions, the developing nations said their
richer counterparts should provide more details on a pledge to boost
climate aid to $100 billion a year and on how they will cut their own
emissions before the poorer countries are required to set their own
targets. “We think we are the weaker side,” said Xie Zhenhua, the head of China’s delegation at United Nations climate talks in
Warsaw. “They need to fulfill these commitments. They have to provide a
timetable and also the size of their contribution. They should have a
very clear signal to society.”
- China’s Stocks Fall Most in Week on Property Concern, Flash PMI.
China’s stocks fell the most in a week after a preliminary
manufacturing index trailed economists’ estimates and on speculation the
government will announce measures to restrain property-price gains.
China Vanke Co. and Poly Real Estate Group Co., the nation’s two biggest
developers, slid more than 3 percent. New China Life Insurance Co.
dropped the most since July. Shanghai Jahwa United Co. plunged 6 percent
to drag down a gauge of consumer-staples producers. Air China Ltd. led a
rally for airline companies for a second day. The Shanghai Composite
Index (SHCOMP) fell 1.1 percent to 2,183.50 at the 11:30 a.m. break,
poised for the biggest loss since Nov.
13.
- Asian Stocks Outside Japan Fall on Fed Concern, China PMI.
Asian stocks outside Japan fell after minutes from the Federal
Reserve’s last meeting signaled U.S. stimulus may be reduced in coming
months and a gauge of China manufacturing fell more than expected.
Samsung Electronics Co., a consumer electronics maker that gets 22
percent of its revenue in America, declined 2.1 percent in Seoul. Prince
Frog International Holdings Ltd., a maker of baby-care products
suspended after its accounting came under scrutiny by a short-seller,
tumbled 18 percent in Hong Kong as it resumed trading. Australand
Property Group fell 3.7 percent in Sydney, extending yesterday’s loss,
as CapitaLand Ltd. sells
part of its 59 percent stake in the developer. The MSCI Asia Pacific excluding Japan Index declined 1.1
percent to 469.86 as of 11:32 a.m. in Hong Kong as all 10
industry groups on the gauge dropped.
- Rebar Falls as China Manufacturing Data Signal Weak Demand.
Steel reinforcement-bar futures in Shanghai declined as a
lower-than-estimated manufacturing gauge for China signaled that demand
would weaken. Rebar for May delivery, the most-active contract on the
Shanghai Futures Exchange, fell as much as 0.6 percent to 3,623 yuan
($595) a metric ton and was at 3,626 yuan at 10:46 a.m.
local time. Prices rose 1.5 percent in the previous two days.
- Goldman(GS) Sees Significant Losses for Iron Ore, Gold in 2014. Iron
ore, gold, soybeans and copper
will probably drop at least 15 percent next year as commodities
face increased downside risks even as economic growth in the U.S.
accelerates, according to Goldman Sachs Group Inc. The risks are
strongest for iron ore, and follow increases in supplies, analysts including Jeffrey Currie wrote in a report
yesterday that identified the New York-based bank’s top 10
market themes for the coming year. Price pressures will mostly
become visible later in 2014, the analysts wrote, forecasting
that bullion, copper and soybeans will decline to the lowest
levels since 2010.
- CFTC’s Chilton Says He’d Vote Against Current Volcker Rule. The Volcker rule that U.S.
regulators are trying to complete this year doesn’t do enough to
limits banks’ ability to make speculative bets, said Bart Chilton, a member of the U.S. Commodity Futures Trading Commission. “There would be no sense even doing a final rule if what is currently being considered on hedging remains the same,”
said Chilton, referring to the rule banning proprietary trading,
in a telephone interview today. He said he is prepared to vote
against the rule as it’s currently drafted.
- EU Risks Violating Bank-Capital Pact, Basel Member Says. The European Union risks violating
international bank-capital standards and its implementing law
should face a rigorous review by global regulators, a Swedish
member of the Basel Committee on Banking Supervision warned.
- Wells Fargo’s(WFC) Stumpf Dislikes Fed Bond Buys That Punish Savers. John
Stumpf, chief executive officer at Wells Fargo & Co., said he
dislikes Federal Reserve monthly bond purchases at this point in the
economic cycle and that the policy has hurt savers. “I’m not a big fan
of QE this late in the recovery,” Stumpf said today at The Year Ahead: 2014, a two-day conference sponsored by Bloomberg LP in Chicago. He was referring to the
Fed’s bond purchases, known as quantitative easing. “QE, while
it’s helped borrowers, has really punished savers,” he said.
- Anxiety Over Asset Bubbles From Homes to Internet Rising in Poll. Asset bubbles are forming in
Internet and social media stocks as well as in the housing
markets of London and China, according to the latest Bloomberg
Global Poll. Eighty-two percent of the responding investors, analysts
and traders who are Bloomberg subscribers said Internet and
social media shares are either at or near unsustainable levels.
Seventy-three percent said the same of Chinese house prices and
69 percent identified London homes as already or almost frothy.
They were less concerned about U.S. housing, with 31 percent
seeing prices approaching or at excessive levels. “Liquidity is still plentiful and central banks are
reflating,” said Kenneth Broux, a strategist at Societe
Generale SA in London and a poll participant. “Property is the
obvious bubble candidate.”
Wall Street Journal:
- Fed Casts About for Endgame on Easy-Money Policy. Federal Reserve officials, mindful of a
still-fragile economy, are laboring to devise a strategy to avoid
another round of market turmoil when they pull back on one of their
signature easy-money programs in the months ahead. Central-bank
officials have been debating for months when to start paring the $85
billion-a-month bond-purchase program. They were surprised during the
summer when their discussions and public pronouncements on the potential
timing rocked markets, pushing interest rates higher and stock prices
down. Minutes of the Oct. 29-30 policy
meeting, released Wednesday, showed officials continued to look toward
ending the bond-buying program "in coming months." But they spent hours
game-planning how to handle unexpected developments and tailoring a
message to the public to soften the impact of the program's end.
- BMW, Cadillac Aim to Pull Plug on Tesla(TSLA) With Pricey New Cars. Tesla
Motors Inc. is about to get deep pocketed rivals in the luxury electric
luxury car market after largely having the business to itself since the
2012 launch of the Model S sedan. BMW AG, General Motors Co.'s
Cadillac and Volkswagen AG's Porsche and Audi brands are among the
luxury brands using this week's Los Angeles Auto Show to promote new
plug-in models aimed at affluent, eco-conscious
Californians who make up the heart of Tesla's buyers. While
models such as the BMW i3 and i8, the Cadillac ELR or Porsche's plug-in
Panamera sedan offer different propulsion technology from the Tesla
Model S and different body styles, they are all cars that get much of
their energy from the electric grid instead of a gasoline pump.
- Nicole Hopkins: ObamaCare Forced Mom Into Medicaid. My mother preferred to pay for her care rather than be on the government dole. Now she has no choice. My mother is not one to seek attention by complaining, so her recent woeful Facebook FB +0.15% post caught my eye: "The poor get poorer." It diverged from the more customary stream of inspirational quotes, recipes and snapshots
from her tiny cottage in Pierce County, Wash.
CNBC:
- Fed sends markets tapering message. The
Federal Reserve looks set to move sooner rather than later to taper
back its bond buying, once more surprising markets that have been
repeatedly confused about when the Fed will begin to step back from its
extraordinary easing policy.
- Are the cracks in the euro starting to show? (video) The
resilient euro may have bounced back from this month's interest rate
cut from the European Central Bank (ECB), but recovering from talk that
the ECB is
mulling negative deposit rates could be much harder, analysts say.
Zero Hedge:
Business Insider:
The Fiscal Times:
Reuters:
- U.S. could run out of cash in March under debt ceiling - CBO. The United States could start
missing payments on its obligations some time between March and
June if lawmakers don't raise a legal limit on borrowing by
early February, congressional analysts said on Wednesday.
The Obama administration was able to bump against the
government's debt ceiling for five months this year before it
came to the brink of default.
- Green Mountain(GMCR) sees strong revenue in second half of 2014. K-cup coffee pods maker Green Mountain
Coffee Roasters Inc said it expected stronger revenue
in the second half of its fiscal 2014 as it converts unlicensed
coffee pod makers to licensed partners. The company, however, gave a cautious current-quarter
forecast, citing a transition to a new brewing system and
weakness in U.S. consumer spending. Shares of Green Mountain, which also approved a share
repurchase program of up to $1 billion, were up 4 percent in
extended trading.
Telegraph:
FAZ:
- Schaeuble's
Advisers See Up to 1.8m German Jobs at Risk. Country's Finance Minister
Wolfgang Schaeuble's experts calculated combined effects of plans from
CDU, CSU and SPD amid coalition talks. Plans include pension programs
and minimum wage.
Yonhap News:
China Daily:
- China to Raise Taxes for Possessing Properties. China will
increase taxes for owning properties, Finance Minister Lou Jiwei said in
an interview. China will start levying consumption taxes for some
resources and high-end consumer goods, according to Lou.
Evening Recommendations
Deutsche Bank:
- Rated (RAD) Buy, target $7.
- Rated (MCK) Buy, target $181.
- Rated (WAG) Buy, target $73.
Night Trading
- Asian equity indices are -1.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 132.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 104.25 +2.5 basis points.
- NASDAQ 100 futures -.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 335K versus 339K the prior week.
- Continuing Claims are estimated to fall to 2870K versus 2874K prior.
- The Producer Price Index for October is estimated to fall -.2% versus a -.1% decline in September.
- The PPI Ex Food and Energy for October is estimated to rise +.1% versus a +.1% gain in September.
8:58 am EST
- The Preliminary Markit US PMI for November is estimated at 52.3.
10:00 am EST
- The Philly Fed for November is estimated to fall to 15.0 versus 19.8 in October.
Upcoming Splits
Other Potential Market Movers
- The
Yellen confirmation vote, Fed's Lacker speaking, Fed's Bullard
speaking, Fed's Powell speaking, BoJ decision, Eurozone PMI, 10Y
Treasury TIPS auction, weekly EIA natural gas inventory report,
Bloomberg Economic Expectations Index for November, weekly Bloomberg
Consumer Comfort Index, (RIG) analyst day and the (INTC) investor
meeting could also impact trading today.
BOTTOM LINE: Asian indices are 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.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.41 +.15%
- Euro/Yen Carry Return Index 140.05 -.92%
- Emerging Markets Currency Volatility(VXY) 8.54 +.95%
- S&P 500 Implied Correlation 33.41 n/a
- ISE Sentiment Index 126.0 -18.18%
- Total Put/Call .96 +18.52%
Credit Investor Angst:
- North American Investment Grade CDS Index 72.74 -.01%
- European Financial Sector CDS Index 106.16 -2.77%
- Western Europe Sovereign Debt CDS Index 62.33 -.26%
- Emerging Market CDS Index 298.67 +2.13%
- 2-Year Swap Spread 10.50 -.75 basis point
- TED Spread 16.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -2.75 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .08% +1 basis points
- Yield Curve 252.0 +10 basis points
- China Import Iron Ore Spot $136.40/Metric Tonne +.07%
- Citi US Economic Surprise Index 6.90 +1.7 points
- Citi Emerging Markets Economic Surprise Index -14.90 -1.0 point
- 10-Year TIPS Spread 2.17 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +96 open in Japan
- DAX Futures: Indicating -51 open in Germany
Portfolio:
- Higher: On gains in my biotech sector longs, emerging markets shorts and index hedges
- Market Exposure: 25% Net Long
