Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 15.41 -.06%
- Euro/Yen Carry Return Index 148.07 +.55%
- Emerging Markets Currency Volatility(VXY) 9.14 +.77%
- S&P 500 Implied Correlation 51.94 -1.22%
- ISE Sentiment Index 146.0 +5.04%
- Total Put/Call .69 -28.12%
Credit Investor Angst:
- North American Investment Grade CDS Index 69.97 -.40%
- European Financial Sector CDS Index 98.21 +3.24%
- Western Europe Sovereign Debt CDS Index 56.17 +.31%
- Emerging Market CDS Index 275.91 -2.39%
- 2-Year Swap Spread 10.0 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap .75 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .07% unch.
- Yield Curve 256.0 +3.0 basis points
- China Import Iron Ore Spot $137.90/Metric Tonne -.86%
- Citi US Economic Surprise Index 31.70 -2.4 points
- Citi Emerging Markets Economic Surprise Index -15.10 -1.2 points
- 10-Year TIPS Spread 2.14 unch.
Overseas Futures:
- Nikkei Futures: Indicating +280 open in Japan
- DAX Futures: Indicating -3 open in Germany
Portfolio:
- Slightly Lower: On losses in my retail sector longs and index hedges
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
Bloomberg:
- Peugeot Plunges After Announcing $1.5 Billion Currency Hit. PSA Peugeot Citroen fell as much as 11 percent after
saying 2013 profit will take a 1.1 billion-euro ($1.5 billion) hit from
currency swings and savings from a General Motors Co. alliance will be less than planned. The partnership’s annual cost reductions will only reach $1.2
billion in 2018, 40 percent less than originally announced and two years
later than targeted, they said. The two dropped plans to cooperate on
subcompact vehicles.
- Putin Says Russia’s Economic Slowdown Caused by Domestic Factors. Russian President Vladimir Putin
said that his country’s economic slowdown is being caused by
domestic reasons rather than a spillover from a global downturn. “Of course we are experiencing the consequences of the
global crisis, but we have to say openly: the main reasons for
the slowdown aren’t external but domestic,” Putin said today in
Moscow in his annual state of the nation speech.
- European Bonds Fall on Praet Comments Amid Fed Taper Speculation. European
government bonds fell, led by Spain and Italy, after European Central
Bank policy maker Peter Praet said the region’s banks may reduce
purchases of
sovereign debt to lower their risk profile.
Spanish five-year yields climbed the most in five weeks.
- European Stocks Fall Amid U.S. Sales, Job-Claims Reports. European stocks fell to a two-month low as investors weighed U.S. retail-sales and jobless-claims
data to gauge whether the Federal Reserve will decide next week
to pare stimulus. John Wood Group Plc plunged the most since July 2011 after
saying 2014 earnings before interest, taxes and amortization at
its engineering unit may drop by about 15 percent. PSA Peugeot
Citroen tumbled 7.6 percent after disclosing a charge of about
1.1 billion euros ($1.5 billion) in its auto operations and
cutting its savings estimate from a partnership with General
Motors Co. Ziggo NV surged to a record after Liberty Global Plc
revived talks to acquire the company.
The Stoxx Europe 600 Index dropped 1 percent to 310.24 at
the close, for its lowest level since Oct. 9.
- Treasury Five-Year Yields Climb as Retail Sales Exceed Estimates.
U.S. five-year note yields reached
the highest level in almost three months as Treasures declined
after data showed retail sales rose more than forecast in
November, adding to bets the Federal Reserve will soon reduce
bond buying amid an improving economy.
- Aluminum Leads Drop in Metals on U.S. Budget, Stimulus Outlook.
Aluminum prices in London fell for the first time in a week, pacing
losses among industrial metals, amid prospects for a U.S. budget accord
and speculation that the Federal Reserve will scale back monetary
stimulus.
“That’s a very big deal for base metals because these
markets have been inflated artificially by the Fed printing
money,” Fain Shaffer, the president of Infinity Trading Corp.
in Indianapolis, said in a telephone interview. Aluminum for delivery in three months dropped 1.4 percent
to $1,791 a metric ton at 5:51 p.m. on the London Metal
Exchange. The price rose in the previous four sessions, the
longest rally in 10 weeks. Tin, lead and nickel also dropped.
- Gold Falls Most in 10 Weeks on Fed Stimulus Outlook; Silver Sags. Gold capped the biggest drop in 10
weeks in New York amid concern that the Federal Reserve will
reduce its bond buying as U.S. lawmakers reached a budget
agreement. Silver and palladium also tumbled. A two-year U.S. budget accord is on track to win passage in
Congress. American retail sales in November climbed 0.7 percent
in November, the most since June, government figures showed
today. The Fed may begin cutting stimulus at its Dec. 17-18
meeting, according to 34 percent of economists surveyed Dec. 6
by Bloomberg, up from 17 percent on Nov. 8.
- VIX Trader Buys $5.1 Million in Call Options to Bet on 50% Rally. An investor bought $5.12 million in
call options that will be profitable if the Chicago Board
Options Exchange Volatility Index (VIX) jumps at least 50 percent in the next four months.
The trader purchased 40,000 April calls on the VIX with a strike price
of 22 for $1.28 each, according to Trade Alert LLC. The bullish
volatility bet was the biggest single block of options to change hands
on U.S. exchanges, the research firm said. It accounted for about 9
percent of VIX trading, data compiled by Bloomberg show.
- BlackRock’s(BLK) Fink Says Limits on Bank Leverage May Go Too Far. BlackRock
Inc. (BLK:US) Chief Executive Officer Laurence D. Fink said limits on
risk-taking by banks may go too far and undermine efforts by the Federal
Reserve to boost the economy. “I am alarmed right now it may have unintended
consequences,” Fink said today during a webcast organized by
BlackRock. “There’s a possibility we’re going to be going too
far with leverage ratios.”
Wall Street Journal:
- House Budget Vote Nears as Tensions Rise. Move Comes as Boehner Escalates Attack on Conservative Groups. The House was set to vote later Thursday on a two-year budget deal, as
opposition in both parties appeared to fall short of threatening passage
and Speaker John Boehner doubled down on his criticism of outside conservative groups.
- Mexico Congress Passes Historic Energy Bill. Mexico's Congress voted amid fistfights and shouts of "treason" to end
the 75-year monopoly of the state-owned oil firm Petróleos Mexicanos.
The landmark bill aims to open the door for foreign oil giants to return
to one of the world's biggest energy markets for the first time since
1938.
- EU Plan Has Creditors Taking Bigger Hit for Failed Banks. Deal Reached That Aims to Reduce Cost to Taxpayers in Case of a Bailout. The
European Union has agreed on a plan that aims to slash the costs to
taxpayers of bank bailouts by putting bondholders—and in extreme cases,
depositors—on the
line when banks fail.
CNBC:
ZeroHedge:
Chicago Tribune:
- Carriers, FCC near deal to make it easier to unlock cell phones. U.S. wireless carriers are hammering out the final details of a deal
with the Federal Communications Commission to adopt new policies to make
it easier for consumers to "unlock" their mobile phones for use on a
competitor's network. The agreement, expected soon, would ensure
that providers notify customers about the eligibility of their
unlocking -- by text message, for example -- and could also cover some
pre-paid phones, industry sources say. The deal would also require
carriers to process or deny unlocking requests within two business days,
according to FCC's earlier guidance.
engadget:
Reuters:
- Cisco(CSCO) cuts long-term revenue growth target to 3-6 pct. Cisco
Systems Inc on Thursday cut its longer-term revenue growth target to a
range of 3 percent to 6 percent per year from its previous range of 5
percent to 7 percent. Chief Financial Officer Frank Calderoni cited macro-economic pressure in emerging markets, conservative customer budgets and
service provider market dynamics for the change.
Financial Times:
- German probe into gold and silver market rigging. Germany’s financial regulator has demanded documents from Deutsche Bank(DB) as part of an investigation into potential manipulation of gold and silver prices.
The probe from the German watchdog comes as regulators around the world
step up their scrutiny of benchmarks after the recent Libor interbank
lending scandal led to hefty fines for banks.
Telegraph:
Digitimes:
- AMD(AMD) slashes desktop CPU prices. AMD has implemented comprehensive price cuts for its
desktop processors, including FM2 socket A4 5300/4000 CPUs, sold in
China and North America to counter Intel's(INTC) reduced-priced Pentium and
Celeron models, according to industry sources. The
price cuts, which range up to 30% for some models, are also being
implemented to usher in AMD's next-generation Kaveri APUs slated for
release in January 2014, the sources indicated.
Style Underperformer:
Sector Underperformers:
- 1) Networking -1.84% 2) Coal -1.38% 3) Hospitals -1.21%
Stocks Falling on Unusual Volume:
- TAM, PF, SEAS, LULU, AFSI, PUK, ATHN, CIEN, DAR, AWAY, MORN, PDH, SUNE, BTI, POST, GWW, NDSN, COO, BPI, TECD, SYY, DGX, BNNY, ASML, MGA, NRF, BNNY, HMSY and PRGS
Stocks With Unusual Put Option Activity:
- 1) BSX 2) CIEN 3) JDSU 4) RHT 5) TRLA
Stocks With Most Negative News Mentions:
- 1) WYNN 2) TER 3) IWM 4) FIO 5) ORCL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +1.29% 2) Biotech +1.19% 3) Oil Service +.65%
Stocks Rising on Unusual Volume:
- UNS, SRPT, EJ, XLS, ZLC, LUV and FB
Stocks With Unusual Call Option Activity:
- 1) BSX 2) SUNE 3) BEAM 4) WMB 5) CIEN
Stocks With Most Positive News Mentions:
- 1) LULU 2) HOV 3) WMT 4) BX 5) YHOO
Charts:
Evening Headlines
Bloomberg:
- Asian Sovereigns Lose for First Year Since 2008 as Growth Stalls. Dollar-denominated
bonds sold by
Asia’s sovereigns are losing money for the first time since 2008 as
growth slows in four of the region’s five largest economies. Debt issued
by countries outside Japan lost 7.1 percent since Dec. 31, the worst
performance in five years, according to JPMorgan Chase & Co.
indexes. Quasi-sovereign borrowers, such as Indonesia’s PT Perusahaan
Listrik Negara, fell 2.8 percent while corporates gained 1 percent.
Emperor International Holdings Ltd., which develops real estate in Hong
Kong, Macau and China, hired banks for a possible sale in the U.S.
currency, according to a Dec. 10 statement.
- Shenzhen Finds H7N9 Flu Virus in Markets Near Hong Kong. The risk of sporadic human infection
is high after three samples collected from live-poultry markets
in the southern city of Shenzhen tested positive for the H7N9
avian influenza virus, the Chinese government said. The Guangdong
province health authority examined 70 samples from 13 live poultry
markets in Shenzhen, it said in a statement yesterday. Shenzhen is an
hour’s train ride from downtown Hong Kong and a popular day-trip
destination for shopping and dining.
- Asian Stocks Drop Second Day Amid Concern Fed Will Taper.
Asian stocks fell, with the regional index heading for its lowest close
in two months, as investors speculate the U.S. budget deal will give
the Federal Reserve confidence to curb stimulus as soon as next week.
Doosan Heavy Industries and Construction Co. sank 4.6 percent in Seoul
after the maker of factory equipment said it will sell 9.5 million
treasury shares. QBE Insurance Group Ltd. lost 5.1 percent in Sydney,
extending this week’s slump to 32 percent, as Fitch Ratings cut the
outlook on Australia second-largest insurer by market value to negative
from stable. Full Speed Inc. surged 16 percent in Tokyo as the
Internet-marketing
firm returned to profit. The MSCI Asia Pacific Index slid 1.1 percent to 138.27 as
of 12:16 p.m. in Hong Kong, with all 10 industry groups on the
gauge falling.
- Rebar Near 11-Week High as Steel Mills in China Reduce Output.
Steel reinforcement-bar futures in Shanghai traded near the highest in
11 weeks as China’s steel mills are under pressure from the government
to reduce output on environmental considerations. Rebar for May delivery, the most-active contract on the
Shanghai Futures Exchange, was little changed at 3,730 yuan
($615) a metric ton at 11:02 a.m. local time, after climbing as
much as 0.3 percent to 3,745 yuan, the highest since Sept. 24.
- Draghi Builds Stress-Test Credibility as ECB Readies Bank Review. The
European Central Bank is showing that it can repair the reputation of
stress tests. More than 90 percent of economists surveyed by Bloomberg
News said that stress tests next year, in the final part of an ECB-led
review of the euro area’s most prominent banks, will be
more credible than previous exercises by the London-based
European Banking Authority. Details of the examinations of about
130 lenders from Banco Santander SA to ABN Amro Bank NV are due
to be released at the end of January.
- Fed to Come Under ‘Rigorous’ House Scrutiny, Hensarling Says.
Representative Jeb Hensarling, chairman of the U.S. House committee
that oversees the Federal Reserve, said he plans to subject the Fed to
unprecedented scrutiny while considering legislation over the coming
year that may focus on its structure, mandates and powers. “It will be the most rigorous examination and oversight of
the Federal Reserve in its history,” Hensarling, a Republican
from Texas and Financial Services Committee chairman, said today
to reporters, referring to a series of hearings scheduled to
start tomorrow. “We will be studying the history, purposes and
policies of the Fed.”
- Senators Vow to Add to Iran Economic Sanctions in 2014. A
number of U.S. senators vowed to continue seeking new sanctions against
Iran after meeting with Secretary of State John Kerry and Treasury
Secretary Jack Lew, who say such measures endanger an international
accord designed
to limit that nation’s nuclear program.
- Airlines Get Relief Under U.S. Budget While Passengers Pay. U.S. airlines won a repeal of $380
million in fees they pay for aviation security each year as part
of a congressional budget deal that raised related charges on
their passengers. The Aviation Security Infrastructure Fee is to be repealed
on Oct. 1, 2014, according to a summary of the deal released by
the House Rules Committee today. The Sept. 11 Security Fee paid
by passengers on airline tickets will more than double, over the
objection of lawmakers who set aviation policy. “The government and the administration shouldn’t treat
airline passengers to be like piggy banks,” House
Transportation and Infrastructure Chairman Bill Shuster, a
Pennsylvania Republican, said in a speech in Washington today.
“Those of us who fly are paying more than our fair share to
reduce the deficit in this country.”
- Big U.S. Bank Stocks Unlikely to Beat Market in 2014, KBW Says. Stocks
of the largest U.S. banks
probably won’t outperform the broader market in 2014 after many
climbed more than 30 percent this year, said Christopher Mutascio, an
analyst at Stifel Financial Corp.’s KBW unit. The median growth in
earnings per share at 11 of the
largest banks, including JPMorgan Chase & Co. and Wells Fargo &
Co., is likely to be 2 percent next year, after a 16 percent
jump in 2013, Mutascio wrote in a report today. Adjusted
earnings per share may fall at JPMorgan and PNC Financial
Services Group Inc., he said. “The large-cap banks no longer appear cheap,” Mutascio
wrote. “The three primary tailwinds for large bank earnings
growth in recent years are either becoming headwinds or are
likely to represent much less of a catalyst going forward.”
Wall Street Journal:
- Fischer Poised to Be Picked as Fed's No. 2. Stanley Fischer, widely seen as a dean among the world's top central
bankers, is President Barack Obama's choice to become second-in-command
at the Federal Reserve, according to people familiar with the matter. A White House nomination isn't far off, said one person familiar with
the matter. Another said talks with Mr. Fischer were well advanced, but
an announcement could take as long as a couple of weeks. Unforeseen
events could derail a nomination, as has happened to other Obama
candidates in recent years.
- Top Western-Backed Rebel In Syria Is Forced to Flee. Islamic Front Takes Over Aid Warehouses From Moderate Rebels. Islamist fighters ran the top Western-backed
rebel commander in Syria out of his headquarters, and he fled the
country, U.S. officials said Wednesday. The
Islamists also took over key warehouses holding U.S. military gear for
moderate fighters in northern Syria over the weekend. The takeover and
flight of Gen. Salim Idris of the Free Syrian Army shocked the U.S.,
which along with Britain immediately froze delivery of nonlethal
military aid to rebels in northern Syria.
- Businesses Stung by $15-an-Hour Pay. Small Businesses Discuss the Problems Posed by a Rising Minimum Wage. With 40 employees and less than $5 million in annual revenue, the
franchise hotel in SeaTac, Wash., could be the typical American small
business. But the Holiday Inn Express will soon have to give most of its
staff pay raises that are anything but routine.
- Juking the ObamaCare Stats. HHS won't disclose the enrollment data that really matter. Most of Washington seems to have bought the White House claim that the
36 federal exchanges are finally working, and glory, glory, hallelujah.
But if that's really true, then what explains the ongoing secrecy and
evasion?
- Norman Podhoretz: Strike Iran Now to Avert Disaster Later. A conventional-weapons attack is preferable to the nuclear war sure to come. Not too many years ago, hardly anyone disagreed with John McCain when he
first said that "the only thing worse than bombing Iran is letting Iran
get the bomb." Today hardly anyone disagrees with those who say that
the only thing worse than letting Iran get the bomb is bombing Iran. And
in this reversal hangs a tale.
MarketWatch.com:
CNBC:
- Hilton Worldwide prices IPO at $20. Hilton Worldwide, the world's largest hotel operator, raised roughly $2.34 billion in its IPO on Wednesday after pricing shares toward the high end of its range.
Zero Hedge:
Business Insider:
Reuters:
Financial Times:
- ECB Aims to Require Banks to Hold Capital Against Sovereign
Bonds. Central bank will seek to combine its new powers as principal
banking regulator with current role as currency issuer to strengthen
requirements on sovereign bonds, which have traditionally been classes
as risk free, citing an interview with Peter Praet, ECB executive board
member. Bank to seek change in regulatory thinking through its health
check of euro zone's 130 biggest lenders combined with any new offer of
cheap long-term liquidity. If sovereign bonds were treated "according to
the risk that they pose to banks' capital," lenders would be less
likely to use central-bank liquidity to buy more government debt, Praet
said.
Evening Recommendations
Night Trading
- Asian equity indices are -1.25% to -.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 129.0 -3.0 basis points.
- Asia Pacific Sovereign CDS Index 103.0 -1.25 basis points.
- NASDAQ 100 futures -.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance for November are estimated to rise +.6% versus a +.4% gain in October.
- Retail Sales Ex Autos for November are estimated to rise +.2% versus a +.2% gain in October.
- Retail Sales Ex Autos and Gas for November are estimated to rise +.3% versus a +.3% gain in October.
- Initial Jobless Claims are estimated to rise to 320K versus 298K the prior week.
- Continuing Claims are estimated to rise to 2757K versus 2744K prior.
- The Import Price Index for November is estimated to fall -.7% versus a -.7% decline in October.
10:00 am EST
- Business Inventories for October are estimated to rise +.3% versus a +.6% gain in September.
Upcoming Splits
Other Potential Market Movers
- The 30Y $13B T-Bond Auction, SNB rate decision, Bloomberg Dec. US Economic Survey, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (UTX) Analyst Meeting, (MYGN) Investor Day, (ABC) Investor Day, (DHR) Analyst Meeting, (AET) Investor Conference and the (DTV) Investor Day could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology
and industrial 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: Substantially Lower
- Sector Performance: Every Sector Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.84 +6.69%
- Euro/Yen Carry Return Index 147.50 -.04%
- Emerging Markets Currency Volatility(VXY) 9.03 +1.69%
- S&P 500 Implied Correlation 52.15 +1.84%
- ISE Sentiment Index 149.0 +13.74%
- Total Put/Call .97 +29.33%
Credit Investor Angst:
- North American Investment Grade CDS Index 69.42 +2.44%
- European Financial Sector CDS Index 96.50 +1.69%
- Western Europe Sovereign Debt CDS Index 56.0 -8.47%
- Emerging Market CDS Index 282.31 +.12%
- 2-Year Swap Spread 10.0 +1.0 basis point
- TED Spread 17.75 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap .5 -2.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .07% unch.
- Yield Curve 253.0 +3.0 basis points
- China Import Iron Ore Spot $139.10/Metric Tonne -.22%
- Citi US Economic Surprise Index 34.10 +1.1 points
- Citi Emerging Markets Economic Surprise Index -13.80 +.9 point
- 10-Year TIPS Spread 2.14 +3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -155 open in Japan
- DAX Futures: Indicating -15 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
