Style Underperformer:
Sector Underperformers:
- 1) Oil Service -1.42% 2) Energy -.66% 3) Utilities -.63%
Stocks Falling on Unusual Volume:
- BRLI, BLOX, ADI, ZUMZ, TIVO, BRSS, LH, CHTR, OGE, NBL, DY, SBNY, TRP, DGX, CBRL, ACMP, LL, TAL, ENB, GNRC, OMCL, JKS, MTD, STMP, TREX and DLLR
Stocks With Unusual Put Option Activity:
- 1) MNST 2) HYG 3) HPQ 4) MGM 5) JCP
Stocks With Most Negative News Mentions:
- 1) MBI 2) ADI 3) EBAY 4) NBL 5) CSX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Computer Hardware +1.36% 2) Gaming +.89% 3) Oil Tankers +.81%
Stocks Rising on Unusual Volume:
- FWLT, HPQ, TTS, HFC, GMCR, INSM, BKS, RKUS and MPC
Stocks With Unusual Call Option Activity:
- 1) BLOX 2) HFC 3) HPQ 4) MPC 5) BYD
Stocks With Most Positive News Mentions:
- 1) HPQ 2) CVS 3) AMR 4) AAPL 5) JCP
Charts:
Evening Headlines
Bloomberg:
- U.S. Bombers Fly Through China Air Zone in Boost for Ally Japan.
Two unarmed American B-52 bombers flew through disputed areas of the
East China Sea covered by China’s new air defense zone, a show of
support for Japan as Prime Minister Shinzo Abe seeks to expand his
nation’s military. China’s
creation of the zone on Nov. 23 may spur Abe to take a more hard-line
stance as his government studies changing how it interprets the
U.S.-imposed pacifist constitution to deploy the country’s armed forces
more freely. Abe is undertaking a review for a 10-year defense plan to
be announced next month that may see Japan’s government add ballistic
missile defense ships and refueling planes.
- Record Spread Blowout Sparks Mini-Crisis Warning: China Credit. Chinese companies’ borrowing costs are climbing at a record pace
relative to the government’s, increasing the risk of defaults and prompting state newspapers to warn of a limited debt crisis. The
extra yield investors demand to hold three-year AAA corporate bonds
instead of government notes surged 35 basis points last week to 182
basis points, the biggest increase since data became available in
September 2007, Chinabond indexes show. That exceeds the similar spread
in India of 120 basis points. The benchmark seven-day repurchase rate
has averaged 4.47 percent in November, the highest since a record cash
crunch in June and up from 3.21 percent a year earlier.
- China’s Nanjing, Hangzhou Raise Second Home Down Payment to 70%. China’s eastern cities of Nanjing and Hangzhou raised the minimum down payment required for second
homes to 70 percent from 60 percent as more cities tighten
property policies because of surging prices. The cities will continue to ban mortgage lending for third
homes and will maintain a 30 percent down payment for buyers of
first homes, the central bank’s Nanjing and Hangzhou branches
said in separate statements on their websites yesterday. Nanjing
will increase housing land supply by 10 percent from the average
in the past five years, the city’s housing authority said in a
statement yesterday.
- Broom-Waving Voters Aim to Sweep Away India’s Elite. By Indian standards, Arvind Kejriwal is an unusual politician: he doesn’t use a police escort, he won’t
field candidates who face murder charges and he publishes the names of
those who contribute to his party’s funds.
- Asian Stocks Swing Between Losses and Gains; BHP(BHP) Declines.
Asia’s benchmark stock index swung between gains and losses after U.S.
consumer confidence unexpectedly dropped this month and as an advance
among information technology shares was offset by declines at
raw-material companies. Industrial Bank of Korea sank 4.2 percent after
the South Korea government sold more than 13 million shares in the
lender. BHP Billiton Ltd. lost 1.6 percent in Sydney after copper prices
fell for the first time in more than a week. Rakuten Inc. surged 7.7
percent in Tokyo, leading IT firms higher, after the website
operator said it will increase its dividend. The MSCI Asia Pacific Index was little changed at 141.60 as
of 11:33 a.m. in Hong Kong, having swung between a loss of 0.2
percent and a gain of 0.1 percent.
- Rubber Drops as U.S. Confidence Data Weaken Demand Outlook.
Rubber fell for a second day after U.S. consumer confidence
unexpectedly dropped this month, weakening the demand outlook for the
commodity used in tires. Futures for delivery in May on the Tokyo Commodity Exchange
dropped as much as 0.6 percent to 256.6 yen a kilogram ($2,531 a
metric ton), nearing a two-week low reached yesterday, and
traded at 257.3 yen at 11:42 a.m. local time. The most-active
contract has lost 15 percent this year.
- Merkel Agrees SPD Coalition to Raise Spending Without New Taxes. Chancellor
Angela Merkel clinched a coalition agreement with the Social Democrats
that calls for a national minimum wage and pledges to increase spending
on pensions and infrastructure without raising taxes. More than two
months after Merkel won national elections, the accord reached shortly
before 5 a.m. in Berlin today after 17 hours of negotiations, sets
Merkel on track for a third term leading Europe’s biggest economy until
2017. The coalition isn’t a done deal yet.
“The principle that every member state is liable for its
own debt must be maintained,” according to a draft of the
agreement. “All forms of collectivizing state debt would
endanger the necessary orientation of national policies in every
member state.” A note from London-based Teneo Intelligence said “the real
risk going forward is an ever-greater unwillingness of the new
coalition to mutualize the fallout from Europe’s persistent
banking problems.”
- Slump-Watchers Dump Yield Curve for 1970s Tool: Cutting Research.
The U.S. Treasury yield curve has
lost its forecasting power and investors wanting to divine the
possibility of a U.S. recession should turn to a little-known
equation from the 1970s. That’s the recommendation of Morgan Stanley
economist Ellen Zentner, who told clients in a Nov. 18 report that the Federal
Reserve’s near-zero interest rate and asset-buying is holding
down U.S. bond rates. That means the yield curve would struggle
to invert, crimping its effectiveness as an indicator of
business cycles, she wrote.
- Gensler Gives Wall Street Two Months to Meet Cross-Border Policy. The top U.S. derivatives regulator
gave Wall Street two months to abide by a new policy imposing
Dodd-Frank Act rules on banks when they arrange trades
domestically and then book them overseas. The Commodity Futures Trading Commission today postponed a
Nov. 14 advisory that undermined a legal interpretation Wall
Street had found buried in a footnote, number 513, in an earlier
agency document. Banks relied on the footnote to keep swap deals
off electronic platforms and away from the agency’s rules that
were put in place in the wake of the 2008 financial crisis.
Wall Street Journal:
- Health Website Deadline Nears. Administration's Promise That It Would Work for Most by Saturday Is Up for Review.
With the clock ticking toward a Saturday deadline, Obama administration
officials promise that the HealthCare.gov website will work better.
Exactly how much better? That is hard to say. The
measure of success, repeated by an array of administration officials,
is that the online marketplace intended to be used by millions of
Americans to obtain health insurance would be working smoothly for the
"vast majority of users" by Saturday, the last day of November.
- Volatile Loan Securities Are Luring Fund Managers Again. Collateralized Loan Obligations Offer High Returns—And Risk. Investment funds aimed at individual
investors are barreling into collateralized loan obligations, a complex
and volatile type of security that was shaken by the financial crisis. Lured
by annual returns of as high as 20%, some mutual-fund managers are
buying CLOs through investment funds that purchase stakes in loans to
companies with low credit ratings. Another type of loan investment fund,
business-development companies, also have begun buying CLOs, according
to securities filings.
- Sohrab Ahmari: An Iranian Insider's View of the Geneva Deal. 'If the right to enrich is accepted, which it has been, then everything that we have wanted has been realized.' "In that message," Mr. Fazlinejad says, "the
imam made it clear that our military war against the arrogance in the
form of Iraq's regime is over. . . . But he advised the youth and the
political activists to 'safeguard the revolutionary hatred and grievance
in your hearts, look upon your enemies with fury and know that you will
be victorious.' " Khomeini's
statement, Mr. Fazlinejad says, "was a message of peace, signaling a
permanent cease-fire. But at the same time it asserted the vitality of
our struggle against the capitalist order. If anyone gets the sense from
these negotiations, as [Foreign Minister] Mr. Zarif has, that we are
getting closer to the West, he is as mistaken as Mr. Zarif."
Barron's:
- Hewlett-Packard(HPQ) Up 7%: FYQ4 Beats; Year EPS View In-Line.
Hewlett-Packard (HPQ) this afternoon reported fiscal Q4 revenue that
topped analysts’ estimates by over a billion dollars, and profit per
share that beat by a penny, with the outlook for this
quarter’s, and the full year’s profit more or less in line with
analysts’ estimates.
- Analog Devices(ADI) Off 4%: FYQ4 Rev Misses, Q1 View Misses.
Shares of chip maker Analog Devices (ADI) are down $1.82, or almost 4%,
at $35.51, in late trading, after the company this afternoon reported
fiscal Q4 revenue that missed analysts’ expectations, but beat on the
bottom line, and projected this quarter’s revenue to miss consensus
substantially.
MarketWatch.com:
CNBC:
Zero Hedge:
Business Insider:
NY Times:
- New Boom in Subprime Loans, for Smaller Businesses. A small, little-known company from Missouri borrows hundreds of
millions of dollars from two of the biggest names in Wall Street
finance. The loans are rated subprime. What’s more, they carry few of
the standard protections seen in ordinary debt, making them particularly
risky bets. But investors clamor to buy pieces of the loans, one of which pays
annual interest of at least 8.75 percent. Demand is so strong, some
buyers have to settle for less than they wanted. A scene from the years leading up to the financial crisis in 2008? No, last month.
- I.M.F. Shifts Its Approach to Bailouts. The International Monetary Fund, convinced that Europe erred in forcing
debtor countries like Greece and Portugal to bear nearly all the pain of
recovery on their own, is pushing hard for a plan that would impose
upfront losses on bondholders the next time a country in the euro area
requests a bailout.
Reuters:
- Network gear maker Infoblox(BLOX) warns on 2nd qtr; shares slide. Network equipment maker Infoblox Inc
forecast second-quarter results below analysts'
expectations, sending its shares down 18 percent in extended
trading.
Infoblox's shares have almost tripled in the past year,
spurred by strong demand for its automation products that help
telecom companies manage internet traffic more efficiently.
Kyodo:
- U.S., Japan to Cooperate Closely on China Defense Zone. U.S.,
Japan share the same concern over China's announcement of an air defense
zone in East China Sea, citing teleconference between U.S. Secretary of
State John Kerry and Japanese Foreign Minister Fumio Kishida.
Sina:
- China's Changsha Raises Downpayment for 2nd Homes. The Chinese
city of Changsha in the southern province of Hunan raised the down
payment required for 2nd home purchases, from 60% currently, citing a city gov't statement dated Nov. 25.
CCTV:
- China Says It Has Ability to Control Air-Defense Zone. China
Defense Ministry Spokesman Geng Yansheng says that the nation has the
ability to effectively manage, control the air-defense identification
zone. U.S. planes' flight along the air-defense zone was under Chinese
military surveillance, citing Geng.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 131.75 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 106.0 +5.0 basis points.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 330K versus 323K the prior week.
- Continuing Claims are estimated to fall to 2850K versus 2876K prior.
- Durable Goods Orders for October are estimated to fall -2.0% versus a +3.7% gain in September.
- Durables Ex Transports for October are estimated to rise +.5% versus a -.1% decline in September.
- Cap Goods Orders Non-defense Ex Air for October are estimated to rise +.9% versus a -1.1% decline in September.
- Chicago Fed National Activity Index for October is estimated to fall to .1 versus .14 in September.
9:45 am EST
- Chicago Purchasing Manager for November is estimated to fall to 60.0 versus 65.9 in October.
9:55 am EST
- Final Univ. of Michigan Consumer Confidence for November is estimated to rise to 73.1 versus 72.0 in October.
10:00 am EST
- The Leading Index for October is estimated unch. versus a +.7% gain in September.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory gain of
+423,000 barrels versus a +375,000 barrel gain the prior week. Gasoline
supplies are estimated to rise by +383,000 barrels versus a -345,000
barrel decline the prior week. Distillate inventories are estimated to
fall by -1,194,000 barrels versus a -4,795,000 barrel decline the prior
week. Finally, Refinery Utilization is estimated to rise +.3% versus a
-.1% decline the prior week.
Upcoming Splits
Other Potential Market Movers
- The
UK GDP report, Italian Senate to vote on expelling Berlusconi, German
Consumer Confidence, $29B 7Y T-Note auction, weekly Bloomberg Consumer
Comfort Index and the weekly MBA mortgage applications report could also
impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by industrial and financial
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.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.54 -1.95%
- Euro/Yen Carry Return Index 143.31 -.03%
- Emerging Markets Currency Volatility(VXY) 8.64 +.58%
- S&P 500 Implied Correlation 53.87 -2.53%
- ISE Sentiment Index 146.0 +1.39%
- Total Put/Call .75 -2.60%
Credit Investor Angst:
- North American Investment Grade CDS Index 68.34 +.52%
- European Financial Sector CDS Index 96.54 -2.67%
- Western Europe Sovereign Debt CDS Index 60.0 -3.23%
- Emerging Market CDS Index 291.88 +.28%
- 2-Year Swap Spread 8.25 -1.25 basis points
- TED Spread 17.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -2.75 -1.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .07% +1 basis point
- Yield Curve 241.0 -4 basis points
- China Import Iron Ore Spot $135.90/Metric Tonne -.44%
- Citi US Economic Surprise Index 3.20 -1.5 points
- Citi Emerging Markets Economic Surprise Index -15.70 -.5 point
- 10-Year TIPS Spread 2.17 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating -70 open in Japan
- DAX Futures: Indicating +16 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech/retail/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- U.S. Sent B-52s Over Disputed China Air Zone, Official Says. The
U.S. flew two B-52 bombers into
an air-defense zone that China has claimed and Japan rejects, according
to a U.S. defense official who said China wasn’t notified in advance.
The pair of unarmed bombers flew from Guam and spent less than an hour
in the Chinese zone as part of an annual training
exercise, said the official, who asked not to be identified
discussing the bomber deployment.
- Growth-Price
Slowdown Raises Southern Debt Risks: Euro Credit. As Greece, Italy and
Portugal strive to push through deficit-cutting measures and so trim
their debt piles, the euro area's combination of slowing economic growth
and inflation is working against them. With some countries in the euro
area carrying debt above 100% of gdp, a sputtering recovery in the
17-nation bloc is threatening to increase debt in the southern European
nations and raise the cost of servicing their debt. The cost of insuring
against deflation in the area over the next two years approached this
year's highest level last week.
- European Stocks Decline as Remy Cointreau, Pernod Retreat. European stocks
dropped, erasing a two-day gain, as Remy Cointreau SA (RCO) and Pernod
Ricard SA dragged food-and-beverage companies lower. Remy sank the most
since January 2009 after forecasting that annual profit will decline by
at least 10 percent. Repsol SA advanced the most in 13 months as the
governments of Spain and Argentina reached a preliminary agreement to compensate the
Madrid-based oil company for its stake in YPF SA. Algeta ASA
posted its biggest rally in more than two years after saying
that Bayer AG has started talks to buy the Norwegian company. The Stoxx Europe 600 Index slipped 0.6 percent to 322.24 at
the close of trading.
- Iron Ore Seen Slumping From Westpac to Goldman on Supply. Iron
ore will probably drop 19 percent by the end of the year as demand
slows and supply increases, Westpac Banking Corp. (WBC) said, joining
Goldman Sachs Group Inc. in forecasting declining prices. Ore may fall to $110 a ton by the end of the year, Justin Smirk, the second-most-accurate industrial metals forecaster
tracked by Bloomberg over the past eight quarters, said in a
report today.
- WTI Crude Falls on Forecast for 10th Weekly Supply Gain. WTI
crude for January delivery slipped 13 cents to $93.96 a barrel at 1:50
p.m. on the New York Mercantile Exchange. The volume of all futures
traded was 46 percent below the 100-day average. Prices are up 2.3 percent this year.
- High-Frequency Traders Meet Nightmare on Elm Street With Nanex.
The nemesis of Wall Street’s high- frequency traders operates out of an
apartment-sized office above the Bliss Salon -- manicure/pedicure $45
-- on Elm Street in the Chicago suburb of Winnetka. Staring at four
computer monitors, Eric Scott Hunsader, the founder of market-data
provider Nanex LLC, looks for hints of illicit trading hidden in
psychedelic images of triangles dancing with dots that represent quotes
to buy and sell U.S. stocks broken down by the millisecond.
Wall Street Journal:
- Why Are Takeover Prices Plummeting? Mergers and acquisitions have been dominated by cheapskates this year. U.S. companies are paying just 19% more, on average, than their acquisition
target’s trading price one week before the deal was announced. That’s the lowest takeover premium since at least 1995, as far back as
records go at Dealogic, which analyzed the data for The Wall Street Journal.
Historically, the premiums have averaged 30%.
- Obama Administration Proposes New Curbs on Campaigning by Tax-Exempt Groups. The Obama administration Tuesday proposed a
crackdown on the widespread use of tax-exempt organizations for
political campaigning, seeking to reduce the influential role that the
secretive groups have played in recent elections. The
new "guidance" issued Tuesday by the Treasury Department and the
Internal Revenue Service would curtail a broad array of these tax-exempt
entities' activities, including campaign advertising, voter
registration, get-out-the-vote efforts, and distribution of voter guides
and campaign materials.
- The Next ObamaCare Mirage. The new line is that the health-care law will save money. That's also not true. Supporters of President
Obama
are working overtime to backtrack from his promise that "If you
like your health-care insurance, you can keep it. Period." While the
president has conceded that this statement was inaccurate, the
administration doesn't seem to have learned its lesson. The damage
control plan is to spread another falsehood about the Affordable Care
Act. The claim this time is that the health-care "cost curve is bending,
and the ACA is a significant part of the reason."
CNBC:
- Robert Shiller on housing: Don't trust momentum. (video)
"We can't trust momentum in the housing market anymore," Nobel
Prize-winning economist Robert Shiller said on CNBC's "Squawk Box." Why not? Investors, and specifically, institutional investors with vast sums of cash.
Zero Hedge:
ValueWalk:
Business Insider:
Washington Post:
- Among American workers, poll finds unprecedented anxiety about jobs, economy. More
than six in 10 workers in a recent Washington Post-Miller Center poll
worry that they will lose their jobs to the economy, surpassing concerns
in more than a dozen surveys dating to the 1970s. Nearly one in three,
32 percent, say they worry “a lot” about losing their jobs, also a
record high, according to the joint survey, which explores
Americans’ changing definition of success and their confidence in the
country’s future.
Breitbart.com:
- Michelle Obama in 2008: Barack Will Make Us 'Sacrifice' for Health Care. (video) Mrs. Obama says: It's going to cost us something as a society to say, 'We can't
tolerate millions of people uninsured. We can't tolerate it.' But in
order for all of us to get a little bit more, a whole bunch of us are
going to have to give up a little something that we have. And that's
not, sort of, what we've been taught…
Reuters:
- JPMorgan(JPM), mortgages drag down 3rd-quarter U.S. bank profits. Huge legal costs at JPMorgan
Chase & Co and slowing demand for mortgages as interest
rates rose caused the first decline in bank profits since 2009,
a third-quarter regulatory update said on Tuesday. Higher interest rates lowered the value of fixed income
assets and sapped demand for mortgage refinancing, the Federal
Deposit Insurance Corporation said.
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.15% 2) Steel -1.85% 3) Airlines -1.05%
Stocks Falling on Unusual Volume:
- SFM, NUAN, VNET, CNP, OGE, MOV, OME, DSW, ROYT, AMWD, BITA, TLK, BKS, FONR, CBRL, DL, MZOR, MEOH, SRE, IQNT, RFM, CUK, BIP, GIB, WPC, GMCR and DLLR
Stocks With Unusual Put Option Activity:
- 1) YUM 2) TIF 3) KBH 4) IACI 5) MMM
Stocks With Most Negative News Mentions:
- 1) BKS 2) CME 3) RIG 4) ANR 5) FCX
Charts:
