Style Underperformer:
Sector Underperformers:
- 1) Hospitals -2.3% 2) REITs -1.32% 3) Homebuilders -1.2%
Stocks Falling on Unusual Volume:
- SMTC, DRI, WGO, CIE, ESS, UHS, ROSE, APOG, MCS, NEOG, SDRL, BRE, CTL, USLV, PODD, LEA, WAB, ICLR, GTU, AAXJ, ATU, KKR, KBH, FNFG and BRLI
Stocks With Unusual Put Option Activity:
- 1) MNST 2) XLE 3) FITB 4) JBL 5) SWKS
Stocks With Most Negative News Mentions:
- 1) BA 2) TGT 3) TSLA 4) SMTC 5) CAT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Oil Tankers +2.99% 2) Coal +1.96% 3) Steel +1.13%
Stocks Rising on Unusual Volume:
- IACI, CCL, ORCL, ACN, SWI, PIR, TMUS, CAG, RCL, X, WOR, SCS, SHLD, OMED and UIS
Stocks With Unusual Call Option Activity:
- 1) PAYX 2) XLP 3) AKS 4) ORCL 5) HYG
Stocks With Most Positive News Mentions:
- 1) ORCL 2) COP 3) IBM 4) AAPL 5) SCTY
Charts:
Evening Headlines
Bloomberg:
- China Rate Swap Surges to Record as Reverse Repos Kept on Hold.
China’s interest-rate swaps jumped the most since July, touching a
record, as the central bank refrained from injecting cash into the
financial system at a time when demand for funds is climbing.
One-year contracts that exchange fixed payments for the floating
seven-day repurchase rate increased 15 basis points to 5.03 percent as
of 10:13 a.m. in Shanghai, according to data compiled by Bloomberg. The
swap climbed as high as 5.07 percent today, the highest in data going
back to April 2006, and has
averaged 3.76 percent this year.
- North Korea Purge Raises Risk of Kim Jong Un’s Show of Force. North Korea’s
execution of Kim Jong Un’s uncle and de facto deputy raises the risk
the leader may take military action against the South to demonstrate his
authority after the purge. South Korea has heightened its combat readiness since Kim’s uncle Jang Song Thaek was executed last week following his
conviction for treason, the highest-ranking official to be
purged since Kim took over upon the death of his father in
December 2011. President Park Geun Hye warned Dec. 16 of
possible “reckless provocations” from the North.
- China’s Stocks Drop for Eighth Day on Concern Over Funding Costs.
Chinese stocks fell for an eight day, extending the benchmark index’s
longest losing streak since June, on concern higher funding costs will
hurt economic growth. Financial companies slid the most among industry
groups. China Minsheng Banking Corp. and Huaxia Bank Co. slumped more
than 1 percent, while Gemdale Corp. led declines for developers with a
1.4 percent retreat. Jiangsu Hengrui Medicine Co. dragged down
health-care companies with a 2.3 percent retreat. Phone stocks gained as
ZTE Corp. climbed 1 percent. The Shanghai Composite Index (SHCOMP) slipped 0.1 percent to 2,146.39 at the 11:30 a.m. break, after changing directions at
least seven times.
- Asian Stocks Rise After Fed Begins Tapering U.S. Stimulus.
Asian stocks rose after the Federal Reserve expressed enough confidence
in the U.S. labor market to taper asset purchases while still promising
to hold interest rates close to zero. Fast Retailing Co., Asia’s
biggest apparel chain, climbed 3.5 percent, pushing Japan’s Nikkei 225
Stock Average toward the highest closing level since 2007 as the yen
touched a five year-low against the dollar. Fanuc Corp. (6954), a
Japanese maker of factory robots, rose 4 percent to be headed for the
highest close on record. Caltex Australia Ltd. surged 11 percent as the
petroleum
refiner said profit may climb to A$340 million ($300 million).
The MSCI Asia Pacific Index advanced 0.2 percent to 138.56
as of 12:01 p.m. in Tokyo, with more than two stocks rising for
each that fell.
- Rebar Rises From 3-Week Low on Improving China, U.S. Economies.
Steel reinforcement-bar futures in
Shanghai climbed from a three-week low as iron ore climbed on
speculation that improving economies in China and the U.S. will boost
demand. Rebar for May delivery on the Shanghai Futures Exchange
gained as much as 0.4 percent to 3,672 yuan ($604) a metric ton and was
at 3,663 yuan at 10:14 a.m. local time. The contract
closed yesterday at 3,656 yuan, the lowest since Nov. 27.
- Copper Falls Third Day as Dollar Rallies on Fed Stimulus Cuts. Copper
declined for a third day as
the dollar strengthened after the Federal Reserve decided to taper its
monthly bond purchases, reducing the appeal of industrial metals as an
alternative investment. The contract for delivery in three months on
the London Metal Exchange dropped as much as 0.6 percent to $7,226 a
metric ton and traded at $7,235 by 10:48 a.m. in Tokyo. The price
touched $7,307.70 on Dec. 16, the highest level since Oct. 23.
The metal is down 8.8 percent this year.
- EU Deadlock Broken as Ministers Agree to Bank Plan. European Union finance ministers
broke a deadlock on how to deal with failing banks, delivering
the agreement lenders demanded before a summit today in
Brussels. The finance chiefs pledged to create a 55 billion-euro ($75
billion) industry-financed resolution fund over the next 10
years, backed an agency to make decisions on handling failing
banks and agreed on cost-sharing procedures.
- EU Lawmakers Fail to Get Deal on Financial Market Rules Overhaul. European Parliament lawmakers and
national officials failed to clinch a deal to overhaul the
bloc’s financial market rulebook, relinquishing their goal of
finding an accord by year-end.
Negotiations broke down in Brussels yesterday over the
scope of planned curbs on commodity derivative speculation and
on investor protection rules, Sven Giegold, a German lawmaker
representing the assembly’s Green group in the talks, said in a
telephone interview. Discussions will resume on Jan. 14 in Strasbourg,
France, he said.
- U.S. Yields Hold at Highest Since 2007 Versus Peers After Fed.
Treasuries held at the cheapest versus their international counterparts
in six years after the Federal Reserve announced plans to trim its debt
purchases. U.S. government securities due in 10 years or more yielded
1.17 percentage points more than non-U.S. sovereign debt as of
yesterday, the most since June 2007, Bank of America Merrill
Lynch data show. The Fed said yesterday it will trim its monthly
bond purchases to $75 billion from $85 billion, curbing the
program known as quantitative easing, or QE, it implemented
support the economy. The move came after data this month showed
improvement in employment, manufacturing and retail sales.
Wall Street Journal:
- France Voices Doubt on Iran Nuclear Deal. Foreign Minister Fabius Concerned Tehran Won't Drop Ability to Build a Bomb. France's foreign minister voiced doubts that
Western powers will reach a final nuclear deal with Iran, questioning
Tehran's willingness to abandon its ability to build an atomic bomb. Laurent Fabius
has propelled France to the forefront of nuclear talks by taking a
tough stance on Iran, which insists its nuclear program is for civilian
and scientific use only.
- National Lampoon's ObamaCare Vacation. State exchange chiefs skip town, while Obama hires a hit man.
President
Obama
has responded to the ObamaCare debacle by bringing in Beltway
liberal mastermind John Podesta as a senior West Wing hand, and he
promptly announced his arrival by likening House Republicans to "a cult
worthy of Jonestown" in an
interview with Politico. The states running their own insurance
exchanges are exacting more accountability for their ObamaCare failures.
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Testing time for Chinese media as party tightens control. Early
next year, Chinese journalists will have to pass a new ideology exam to
keep their press cards, in what reporters say is another example of the
ruling Communist Party's increasing control over the media under
President Xi Jinping. It is the first time reporters have been required
to take such a test en masse, state media has said. The exam will be
based on a 700-page manual being sold in bookshops. The manual is
peppered with directives such as "it is absolutely not permitted for
published reports to feature any comments that go against the party
line", and "the relationship between the party and the news media is one
of leader and the led". The impact of increased control in the past year has been chilling, half a dozen reporters at Chinese state media told Reuters, mostly on condition of anonymity to avoid repercussions for talking to the foreign media without permission.
South China Morning Post:
- Communist
Party Tightens Grip on China Journalism Schools. Sr local propaganda
officials to become heads, high-level officials at journalism programs
at 10 top-tier universities, citing 3 people familiar with the plan.
Similar changes may be made at other journalism schools later. Education
on "Marxist view" of journalism to be stepped up.
Shanghai Securities News:
- China Banking Regulatory Commission will closely watch risks from commercial banks' off-balance sheet business and trading operations and will introduce regulations "when conditions are ripe," citing Yang Shaojun, deputy head at the commission's office.
People's Daily:
- Official Says China Trade Outlook Next Year Is Difficult.
China's foreign trade is facing a difficult or "very" difficult outlook
next year, citing Song Lihong, a deputy director at the Ministry of
Commerce's Comprehensive Department. Song said recovery in developed
nations or global economy didn't have the usual impact on China's trade
growth this time. It's hard to say anything optimistic about China's
exports in 2014, Song said. Song said China must abandon the strategy of
obtaining market share with low prices and high volumes.
China Securities Journal:
- China's 50 Cos. May Finish IPO Procedures in January. Fifty
companies may complete initial public offering procedures in China in
Jan., citing data from China Securities Regulatory Commission.
Evening Recommendations
UBS:
- Rated (ALK), (LUV) and (DAL) Buy.
Night Trading
- Asian equity indices are unch. to +1.5% on average.
- Asia Ex-Japan Investment Grade CDS Index 127.5 unch.
- Asia Pacific Sovereign CDS Index 102.25 -.5 basis point.
- NASDAQ 100 futures -.16%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to fall to 335K versus 368K the prior week.
- Continuing Claims are estimated to fall to 2775K versus 2791K prior.
10:00 am EST
- The Philly Fed for December is estimated to rise to 10.0 versus 6.5 in November.
- Existing Home Sales for November are estimated to fall to 5.02M versus 5.12M in October.
- The Leading Index for November is estimated to rise +.7% versus a +.2% gain in October.
Upcoming Splits
Other Potential Market Movers
- The weekly EIA natural gas inventory report, $29B 7Y T-Note auction, UK retail sales report, Bloomberg Economic Expectations Index for Dec. and the weekly Bloomberg Consumer Comfort Index could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 75% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Almost Every Sector Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 14.42 -11.04%
- Euro/Yen Carry Return Index 148.58 +.77%
- Emerging Markets Currency Volatility(VXY) 8.94 -1.65%
- S&P 500 Implied Correlation 61.22 -5.71%
- ISE Sentiment Index 122.0 -.81%
- Total Put/Call .86 -1.15%
Credit Investor Angst:
- North American Investment Grade CDS Index 67.97 -2.92%
- European Financial Sector CDS Index 94.93 -1.12%
- Western Europe Sovereign Debt CDS Index 62.0 -1.59%
- Emerging Market CDS Index 268.12 -1.19%
- 2-Year Swap Spread 6.75 -1.5 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -2.5 -2.75 basis points
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- Yield Curve 255.0 +3.0 basis points
- China Import Iron Ore Spot $133.40/Metric Tonne -.67%
- Citi US Economic Surprise Index 44.10 -1.1 points
- Citi Emerging Markets Economic Surprise Index -14.3 +2.5 points
- 10-Year TIPS Spread 2.16 -2 basis points
Overseas Futures:
- Nikkei Futures: Indicating +340 open in Japan
- DAX Futures: Indicating +81 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/medical/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -1.04% 2) Computer Hardware -.62% 3) Oil Service -.51%
Stocks Falling on Unusual Volume:
- AAPL, STLD, EDD, JBL, AFSI, MWE, F, ENTA, EC, PAY, AEGN, GOGO, AVD, ONTX, ADUS, ALB, ESV, EQT, LNKD, GM, MU, BNFT, COO, IRBT, PSG, KKR, EE and NBL
Stocks With Unusual Put Option Activity:
- 1) JBL 2) CCL 3) PAY 4) F 5) XLU
Stocks With Most Negative News Mentions:
- 1) F 2) COP 3) CVX 4) GS 5) TXN
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +2.75% 2) HMOs +1.33% 3) Medical Equipment +1.29%
Stocks Rising on Unusual Volume:
- VCI, ABTL, OMER, HALO, VNET, YRCW and NPSP
Stocks With Unusual Call Option Activity:
- 1) JBL 2) HALO 3) WIN 4) RSH 5) AFSI
Stocks With Most Positive News Mentions:
- 1) JBL 2) FDX 3) TWTR 4) OSK 5) GLD
Charts:
