Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 15.43 -.71%
- Euro/Yen Carry Return Index 147.75 -.33%
- Emerging Markets Currency Volatility(VXY) 9.08 -.55%
- S&P 500 Implied Correlation 52.39 +1.26%
- ISE Sentiment Index 138.0 -2.13%
- Total Put/Call .81 +15.71%
Credit Investor Angst:
- North American Investment Grade CDS Index 69.91 -.34%
- European Financial Sector CDS Index 97.43 -.27%
- Western Europe Sovereign Debt CDS Index 56.36 +.34%
- Emerging Market CDS Index 277.46 +.89%
- 2-Year Swap Spread 10.25 +.25 basis point
- TED Spread 18.25 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap 1.0 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .06% -1 basis point
- Yield Curve 254.0 -2.0 basis points
- China Import Iron Ore Spot $136.0/Metric Tonne -1.38%
- Citi US Economic Surprise Index 32.10 +.4 point
- Citi Emerging Markets Economic Surprise Index -15.0 -.1 point
- 10-Year TIPS Spread 2.16 +2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +157 open in Japan
- DAX Futures: Indicating +20 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/tech sector longs and index hedges
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges, then added them back
- Market Exposure: 25% Net Long
Bloomberg:
- China Pledges to Tackle Local Government Debt Amid Reform. China’s leaders pledged to tackle
local government debt next year while creating a stable economic
and social environment to promote reforms. The government will
maintain continuity and stability in
its macro-economic policies in 2014 and stick to a prudent
monetary policy and proactive fiscal policy, China Central Television
reported, citing a statement from the annual Central Economic Work
Conference that ended yesterday.
- Chinese Stock Index Falls for Fourth Day Before Policy Targets.
China’s benchmark stock index fell for a fourth day, capping a weekly
decline, before the government announces economic growth targets for
next year. China Oilfield Services Ltd. (601088) and ZTE Corp. dropped
at least 1 percent, leading energy and phone stocks to the biggest
declines among industry groups. Cosco Shipping Co., a unit of the
biggest shipping group, advanced 1.3 percent as a benchmark of commodity
shipping rates climbed for a 14th day. The Shanghai Composite Index (SHCOMP) dropped 0.3 percent to 2,196.08 at the close.
- European Stocks Are Little Changed as Peugeot Shares Slip.
European stocks were little changed, with the Stoxx Europe 600 Index
posting a second weekly drop, as investors awaited next week’s Federal
Reserve meeting, and as gains in AstraZeneca Plc (AZN) offset PSA
Peugeot (UG) Citroen’s slide. AstraZeneca rose to a six-month high after
a diabetes pill from the company and Bristol-Myers Squibb Co. won the
backing of a U.S. advisory panel. Peugeot slumped the most in five years
as General Motors Co. said it is selling its entire stake in the French
carmaker. RSA Insurance Group Plc plunged 7.2 percent
after its Chief Executive Officer Simon Lee resigned as an
investigation into accounting practices at its Irish unit forced
the company to increase reserves.
The Stoxx 600 fell 0.2 percent to 309.75 at the close of
trading.
- WTI Oil Falls to One-Week Low on Fuel Storage.
West Texas Intermediate crude
dropped to the lowest level in more than a week as falling demand
boosted fuel inventories and on concern that the Federal Reserve will
curb stimulus.
Prices slid as much as 1.3 percent.
- Kids Living in Basements Drag On U.S. Services Spending: Economy.
The U.S. economy is suffering a service interruption. Consumer spending
on services -- everything from rents and water bills to health care and
haircuts -- is a laggard as the economy has recovered from the worst
recession since the Great Depression. Such expenditures adjusted for inflation have risen 6.3 percent since mid-2009, compared with a 34 percent surge in outlays on durable goods such as automobiles and appliances,
according to data from the Commerce Department in Washington.
Wall Street Journal:
- China Turns Over Corporate Audit Documents to U.S. Regulators. Related to a Sweeping Probe of U.S.-traded Chinese Firms. Chinese authorities have turned over more audit documents to U.S.
regulators regarding U.S.-traded Chinese companies, audit firms
disclosed in legal filings, part of a sweeping U.S. probe of suspected
instances of accounting fraud. Audit documents regarding at least six Chinese companies trading on
U.S. exchanges now have been either turned over to U.S. regulators or
are “in the pipeline” to be furnished to the U.S., the audit firms said
in filings in an administrative proceeding pending before the Securities
and Exchange Commission. As recently as July, only one company’s documents were definitively known to have been turned over.
- Monte dei Paschi Impasse Puts Rescue at Risk. Bank's Largest Shareholder Says It Will Vote Against $4.1 Billion Capital Increase.
A clash between the management of Banca Monte dei Paschi di Siena
BMPS.MI -3.28% SpA and the bank's largest shareholder threatens to throw
into chaos a plan to raise cash needed to stave off its full
nationalization. The
Monte dei Paschi foundation, a charitable group that is the Siena-based
bank's biggest shareholder with a 34% stake, is in financial straits
due to the lender's troubles, as well as the foundation's attempts to
keep control of Italy's third-largest financial institution.
Fox News:
- Chinese naval vessel tries to force U.S. warship to stop in international waters. A Chinese naval vessel tried to force a U.S. guided missile warship
to stop in international waters recently, causing a tense military
standoff in the latest case of Chinese maritime harassment, according to
defense officials. The guided missile cruiser USS Cowpens, which recently took part in
disaster relief operations in the Philippines, was confronted by Chinese
warships in the South China Sea near Beijing’s new aircraft carrier
Liaoning, according to officials familiar with the incident.Arrest made in attempt to bomb Wichita airport, FBI says.
- Arrest made in attempt to bomb Wichita airport, FBI says. An individual was arrested Friday morning for allegedly trying to
bomb the Wichita Mid-Continent Airport in Kansas, authorities said. The federal complaint alleges that the man arrested worked at the
airport as an aviation technician and believed he was driving a vehicle
loaded with explosives. He was going to use his airport access card to
gain access to secure areas in the airport, the FBI said. He planned on
dying in the explosion, authorities said.
MarketWatch:
CNBC:
ZeroHedge:
Business Insider:
the hedgefund journal:
- HFR: Hedge fund launches fall. New
hedge fund launches declined to the lowest level in nearly three years
in the third quarter, while the number of hedge fund liquidations rose
to the highest level since the fourth quarter of 2012, according the
latest HFR Market Microstructure Industry Report, released by HFR. The
trends in launches and liquidations occurred in Q3 as US regulators
proceeded toward approval of the Volcker Rule (which was approved this
week), while launch trends have not been significantly impacted by the
recent relaxation of hedge fund marketing restrictions associated with
the JOBS Act.
Reuters:
- U.S. FHA says facing $1.3 billion capital shortfall. The Federal Housing
Administration, which recently received an infusion of funds
from the U.S. Treasury to cover projected losses, said an audit
of its finances has found it still faces an expected $1.3
billion capital shortfall.
- Europe faces moment of truth on banks, with flawed defences. Europe's banks face a moment of
truth next year when health checks will spell out the repairs
they need. The trouble is that fixing them could require cash-strapped
governments to borrow more, often from the very banks that need
their help.
- Fed pullback concern boosts dollar, pressures stocks. The U.S. dollar touched a
five-year high against the yen and rose against the euro on
Friday, while global equity indexes slipped on growing concerns
the U.S. Federal Reserve could surprise investors by scaling
back its stimulus as early as next week.
USA Today:
Telegraph:
- Bank of America(BAC) advises China default contracts to hedge debt storm. Chinese bond yields have already risen to the highest in a decade yet markets
remain “complacent” about the implications.
Bin Yao, the bank’s credit strategist in Asia, said Chinese bond yields have
already risen to the highest in a decade as the authorities seek to rein in
rampant growth of the M2 money supply and excess credit, yet markets remain
“complacent” about the implications.
The Globe and Mail:
- Ottawa to designate crude oil as highly dangerous. The
federal government will, for the first time, designate crude oil a
highly dangerous substance and introduce tougher safety and testing
measures for shipping oil by rail, Transport Minister Lisa Raitt has
told The Globe and Mail.
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
Style Underperformer:
Sector Underperformers:
- 1) Energy -.94% 2) HMOs -.61% 3) Biotech -.40%
Stocks Falling on Unusual Volume:
- DAR, APC, TCPC, RH, INSY, WGP, LULU, WES, SATS, DGLD, OPEN, VOC, SODA, GIMO, CNSI, XLS, AVK, AMCC, CQP, ADT, ESS, GDP, EOG, BP and EMN
Stocks With Unusual Put Option Activity:
- 1) ADBE 2) CTB 3) DISH 4) SYMC 5) CMCSA
Stocks With Most Negative News Mentions:
- 1) APC 2) CA 3) LULU 4) UTX 5) IBM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.18% 2) REITs +.28% 3) Defense +.23%
Stocks Rising on Unusual Volume:
- ICLD, TROX, CNC, ADBE, YRCW, NLSN, EA, CMLP and TROX
Stocks With Unusual Call Option Activity:
- 1) ADBE 2) APC 3) CYTR 4) RH 5) RGLD
Stocks With Most Positive News Mentions:
- 1) OPEN 2) QCOM 3) HON 4) ADBE 5) AAPL
Charts:
Evening Headlines
Bloomberg:
- Aussie Dollar’s Longest Drop in 28 Years Driven by RBA Jawboning. The Australian dollar headed for its
longest stretch of weekly losses since 1985, as the central bank
head intensified his efforts to talk down the world’s fifth-most
traded currency. Governor Glenn Stevens signaled a weaker Aussie is
preferable over lower interest rates to help spur the nation’s
slowing economy. The Aussie touched a more-than-three month low
of 89.14 U.S. cents after Stevens said a level of 85 U.S. cents
“would be closer to the mark than 95 cents,” in an interview
published in the Australian Financial Review today. The governor
last month put markets on notice, saying, while the benefits of
intervention haven’t “so far” outweighed the costs, it
“doesn’t mean we will always eschew” currency sales.
- China Mobile Gives $919 Discount on Samsung and Sony 4G Handsets. China
Mobile Ltd. (941) is offering early adopters of its new
fourth-generation wireless service discounts of as much as $919 on eight
smartphones from Samsung Electronics Co. (005930), Sony Corp. (6758),
HTC Corp. (2498) and five local vendors. In a marketing blitz on
billboards at bus stops and subway stations across Beijing, the Samsung,
Sony and HTC devices are all prominently featured. Domestic vendors in
China Mobile’s first wave of 4G handsets include ZTE Corp. (763), Huawei
Technologies
Co., and the Coolpad brand of China Wireless Technologies Ltd.
- Yen Weakens to Five-Year Low as Most Asian Stocks Advance.
The yen slumped to a five-year low
while most Asian stocks rose as investors weighed prospects the Federal
Reserve will reduce stimulus next week. Metals declined. The yen weakened 0.4 percent to 103.83 per dollar as of 1:45 p.m. in Tokyo and earlier touched 103.87, the lowest level
since October 2008. The MSCI Asia Pacific Index of regional
equities was little changed, after sliding as much as 0.7
percent to a three-month low.
- Copper Falls on Record China Output, Fed Tapering Speculation.
Copper dropped for the first time in
six days, paring a weekly gain, as record output in China spurred
oversupply concerns and amid speculation on the timing of stimulus cuts
by the U.S. Federal Reserve. The contract for delivery in three
months on the London Metal Exchange fell as much as 0.4 percent to
$7,195 a metric ton and traded at 7,209.50 at 9:59 a.m. in Shanghai.
Today’s
loss reduced this week’s gain to 1.2 percent. The metal is down
9.1 percent this year.
- Rebar Set for First Weekly Loss in Four as Production Costs Fall. Steel
reinforcement-bar futures in Shanghai headed for the first weekly loss
in four, as steel production costs declined on lower prices of raw
materials. Rebar for May delivery, the most-active contract on the
Shanghai Futures Exchange, fell by as much as 1.2 percent to 3,684 yuan
($607) a metric ton, before trading at 3,690 yuan at
10:15 a.m. local time. The contract lost 0.3 percent this week.
- U.K. Housing Market Seen at Risk of Overheating. Bank
of England Governor Mark Carney may be struggling to prevent Britain’s
housing market from reaching what he calls “warp speed.” About two-thirds of 27 economists in a Bloomberg News
survey said property in the U.K. is at risk of overheating. The
survey, published today, also showed that the outlook for the
economy has improved, with forecasts for growth this quarter
raised to 0.7 percent from 0.6 percent last month.
- Keystone Backed in Poll by 56% of Americans as Energy Security.
More Americans view the Keystone XL oil pipeline as a benefit to U.S.
energy security than as an environmental risk, even as they say Canada
should do more to reduce greenhouse gases in exchange for approval of
the project. A Bloomberg National Poll shows support for the $5.4
billion link between Alberta’s oil sands and U.S. Gulf Coast refineries
remains strong, with 56 percent of respondents viewing it as a chance to
reduce dependence on
oil imports from less reliable trading partners. That compares with the
35 percent who say they see it more as a potential source of damaging
oil spills and harmful greenhouse gas emissions.
- Cisco(CSCO) Cuts Sales Forecast as Emerging Market Sales Stall. Cisco
Systems Inc. (CSCO), the biggest maker of computer-networking
equipment, reduced its revenue forecast for the next three to five years
amid weaker demand from emerging markets and telecommunications-service
providers. The company expects average sales growth of 3 percent to
6 percent in the coming years, Chief Financial Officer Frank Calderoni
said today at a meeting with analysts in New York. That’s lower than an
earlier projection for sales to rise 5
percent to 7 percent, which the company repeated last month.
Cisco is facing reduced spending by phone companies and
corporations, as well as slower economic expansion in Europe,
Asia and emerging countries.
- Anadarko’s(APC) Kerr-McGee Held Liable by Judge in Tronox Spinoff. Anadarko Petroleum Corp. and its
Kerr-McGee unit acted improperly in the 2005 spinoff of Tronox
Inc. and may have to pay as much as $14 billion related to
environmental cleanup and health claims, a judge ruled. Anadarko shares plunged on the decision, in which the judge
weighed how much money can be recovered from a successor to a
polluting company, even after bankruptcy has ostensibly cleaned
the slate of obligations.
Wall Street Journal:
- In China, Western Companies Cut Jobs as Growth Ebbs. Recruiting and Consulting Firms Feel Squeeze From Pullbacks. After
years of rapid expansion in China,
some Western companies are shedding jobs as the world's second-largest
economy grows at its lowest rate in more than 20 years. Hewlett-Packard
Co. says it is laying off a small percentage of its workforce in China,
which the company calls one of its most important markets. Johnson
& Johnson is cutting its pharmaceutical sales force by an
undisclosed amount, people close to the company say.
- IRS Targeting: Round Two. The first time around, targeting conservatives was a secret. Now, not so much. President Obama keeps claiming that he had no knowledge of the Internal
Revenue Service's abusive muzzling of conservative groups. That line is
hard to swallow given that his Treasury and IRS are back at it—this time
in broad daylight.
Barron's:
Fox News:
- House overwhelmingly approves two-year budget plan on a bipartisan vote. The House approved a two-year spending plan on Thursday evening, in a
strong bipartisan vote that underscored the desire by many lawmakers to
avoid a repeat of the October budget showdown. The bill was approved 332-94, over the objections of conservatives
concerned it would increase spending in the short-term and liberals
concerned it would not extend long-term jobless aid.
CNBC:
- Going, going ... a number of tax deductions set to expire. Ready for year-end tax planning? In between holiday parties and
last-minute shopping, it's worth making sure that you are minimizing
your 2013 tax bill. It's almost always wise to maximize your
deductions, prune losers from your portfolio and fill your retirement
accounts as much as the rules allow.
- As wealthy cinch the purse, holiday spending slides: Survey. The survey of 800 people nationwide (with a margin of error of 3.5
percent) predicts a sharp, 9.4 percent drop in holiday spending this
year compared with actual outlays a year ago as measured by the National
Retail Federation. Americans plan to spend just $681 this holiday
season, about on par with 2009, when the nation was clawing its way out
of a deep financial crisis.
Zero Hedge:
Business Insider:
Washington Post:
- U.S. may be open to Islamists joining Syrian rebel coalition. The Obama administration is willing to consider supporting an
expanded Syrian rebel coalition that would include Islamist groups,
provided the groups are not allied with al-Qaeda and agree to support
upcoming peace talks in Geneva, a senior U.S. official said Thursday. In addition, the official said, the Americans would like the
Islamic Front groups to return U.S. vehicles, communications gear and
other non-lethal equipment they seized last weekend from warehouses at
the Syria-Turkey border.
LA Times:
- Many who enrolled in health plans still await confirmation. Anxiety grows as health plan delays could leave some customers without a policy by Jan. 1.
Thousands of Californians have overcome long waits and website glitches
to sign up for Obamacare insurance, but now enrollment snags may
prevent some of them from actually having coverage starting Jan. 1.
Reuters:
- United Technologies(UTX) gives muted view for 2014. United
Technologies Corp, the world's largest maker of elevators and air
conditioners, on Thursday projected earnings to rise 7 percent to 11
percent next year, barely meeting analysts' targets, and gave a revenue view that fell short of Wall Street
expectations.
- Adobe's(ADBE) Creative Cloud subscriber growth impresses investors. Adobe
Systems Inc, the maker of Photoshop and Acrobat software, forecast
current-quarter results below analysts' estimates but reported a 22
percent jump in the number of subscribers to its Creative Cloud suite
from the preceding quarter.
The company's shares rose about 8 percent after initially falling 5 percent in extended trading.
Economic Information Daily:
- China may keep a "proactive" fiscal policy and "prudent" monetary policy next year and rely on "fine-tuning," citing Gao Peiyong, head of the National Academy of Economic Strategy under the Chinese Academy of Social Sciences.
China Securities Journal:
- PBOC Official Warns on 'Keynesian Stimulus'. Governments shouldn't overuse
"Keynesian stimulus" measures to deal with the global deleveraging, Yao
Yudong, an official with the Monetary Policy Department of the People's
Bank of China wrote.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 130.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 101.50 -1.5 basis points.
- NASDAQ 100 futures +.26%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Producer Price Index for November is estimated unch. versus a -.2% decline in October.
- The PPI Ex Food and Energy for November is estimated to rise +.1% versus a +.2% gain in October.
Upcoming Splits
Other Potential Market Movers
- The China FDI report, (SMG) Investor Day, (LSTR) Mid-Quarter Update and the (CNC) Investor Meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by automaker and commodity shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.
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
