Style Outperformer:
Sector Outperformers:
- 1) Computer Hardware +1.69% 2) Biotech +1.53% 3) Homebuilding +1.49%
Stocks Rising on Unusual Volume:
- MKTG, JNY, CCIX, TRAK, RHT, WMC, MKTO, CTCT, FINL, AMBA, AGN, JAZZ, SWIR, ARRS, GPRE, WETF, AFSI and ISIS
Stocks With Unusual Call Option Activity:
- 1) NBL 2) FE 3) WPX 4) ERX 5) TIBX
Stocks With Most Positive News Mentions:
- 1) RHT 2) GOOG 3) WHR 4) ORCL 5) TWTR
Charts:
Evening Headlines
Bloomberg:
- Heavy Pollution Returns in Shanghai After Week of Improved Skies.
Pollution in China’s commercial hub worsened today after a week of
improved air quality as authorities warned children and the elderly to
avoid all outdoor activities with PM2.5 pollutants exceeding eight times
the level recommended by the World Health Organization for safe
breathing. The air quality index was 206 as of 10 a.m., indicating
“heavy pollution,” the Shanghai Environmental Monitoring Center said on its website today.
- China Money Rate Climbs, Stocks Slide as Cash Crunch Persists. China’s
benchmark money-market rate rose and stocks dropped for a ninth day,
the longest losing streak in 19 years, as targeted cash injections by
the central bank failed to alleviate the worst cash crunch since June.
The seven-day repurchase rate, a gauge of funding availability in the
banking system, increased 100 basis points to a six-month high of 7.60
percent in Shanghai, according to a daily fixing by the National Interbank Funding Center. It has jumped 328 basis points this week, the most since January 2011.
Transactions had been reported at rates ranging from 3.80 percent to 9.5
percent as of 11:08 a.m. local time, with a weighted average of 7.76 percent. The Shanghai Composite Index (SHCOMP) of shares dropped 0.8 percent.
- Asian Stocks Drop Amid Chinese Funding-Cost Concerns.
Asian stocks fell, led by Chinese shares amid concern funding costs for
the nation’s lenders will remain high even after the central bank
injected cash into the financial system. Agricultural Bank of China Ltd.
lost 1 percent in Hong Kong. McDonald’s Holdings Co. Japan Ltd. (2702)
declined 1.6 percent after cutting its full-year profit forecast by more
than half in the fast-food chain’s second-largest market. Telstra Corp.
(TLS) rose 1 percent, pushing Australia’s benchmark index toward the
biggest two-day gain in six months, after agreeing to sell its
Hong Kong mobile phone business.
The MSCI Asia Pacific Index fell 0.2 percent to 138.07 as
of 11:14 a.m. in Hong Kong. Hong Kong’s Hang Seng China
Enterprises Index of mainland shares listed in the city
retreated 0.9 percent, on course to lose 3 percent this week.
- Rebar in Shanghai Narrows Weekly Loss After China PBOC Adds Cash.
Steel reinforcement-bar futures in Shanghai rose for the first time in
seven days, trimming a weekly loss after China’s central bank injected
funds to selected lenders to alleviate a cash squeeze. Rebar for May delivery on the Shanghai Futures Exchange rose as much as 0.4 percent to 3,665 yuan ($604) a metric ton,
before trading at 3,661 yuan at 10:55 a.m. local time. The gain
cut the week’s loss to 0.4 percent, the second weekly drop.
- EU Leaders Delay Deal on Incentives for Economic Reforms. European Union leaders pushed back
the introduction of a German-inspired system to encourage
nations to modernize their economies, as northern and southern
countries wrangled over financial incentives. A June deadline was delayed until October as leaders
sparred over whether steps to boost competitiveness would be
binding and what sort of rewards countries would get for
enacting them.
- Fed Seen Tapering QE in $10 Billion Steps in Next Seven Meetings. The
Federal Reserve is likely to reduce its bond purchases in $10 billion
increments over the next seven meetings before ending the program in
December 2014, economists said. The median forecast in a Bloomberg
survey of 41 economists matches the $10 billion reduction announced
yesterday as the Fed began to unwind the unprecedented stimulus that has
defined Ben S. Bernanke’s chairmanship.
- Lew Says U.S. Ability to Borrow May Run Out by Late February. Treasury Secretary Jacob J. Lew
warned Congress that the U.S. will exhaust its borrowing
authority as soon as late February and urged lawmakers to raise
the federal debt limit weeks before then. The Treasury Department estimates that so-called
extraordinary measures used to avoid breaching the debt limit
“would be able to extend the nation’s borrowing authority only
until late February or early March 2014,” Lew said in a letter today to House Speaker John Boehner and other congressional
leaders.
Wall Street Journal:
- Obama Issues Rare Veto Threat on Iran Bill. Bipartisan
Senate Bill Would Slap Tehran With New Sanctions. The White House
issued a rare veto threat in response to a bipartisan
Senate bill that would slap Iran with new sanctions if it violates an
interim deal reached last month to curb its nuclear program. The
threat sets up a standoff in the new year between President Barack Obama
and more than two dozen Senate Democrats and Republicans who introduced
the legislation on Thursday. The challenge to Mr. Obama is
particularly stark because half of the lawmakers sponsoring the new bill
are from his own party.
- Europe's Banking Deal Leaves Doubts. Decision Reached on Centralized Handling of Failing Lenders. Europe's leaders have their banking union, but Europe's financial system is far from unified. Eighteen
months ago, euro-zone leaders set out to revolutionize their banking
system, promising to secure their common currency against the kind of
crises that had almost bankrupted Spain and Ireland and sent shockwaves
across the Continent. They pledged to "break the vicious circle between banks and sovereigns."
- Mary Landrieu and All That JAZZ. The Louisiana senator says she's pro-energy,
but her PAC has raised a lot of money to elect opponents of the oil and
gas industry.
- John Beale's EPA. An amazing fraud by an architect of government climate policies. Last month we told you about
John Beale,
the Environmental Protection Agency employee who bilked taxpayers
out of almost $900,000 by pretending to be a secret agent. Telling EPA
colleagues that he was a CIA operative, Beale was paid for long absences
while on imaginary missions for "Langley." Now there is a disturbing
new question about John Beale that goes to the heart of the EPA's
mission. What was he doing when he actually showed up for work?
Fox News:
- Administration announces new ObamaCare exemption. The Obama administration, in an 11th-hour change just before the
holiday break,announced a major exemption in ObamaCare that will let
people who lost coverage and are struggling to get a new plan sign up
for bare-bones policies. The move Thursday to allow potentially hundreds of thousands of
people to sign up for "catastrophic" coverage plans was blasted by the
insurance industry as a shift that would cause "tremendous instability.”
CNBC:
Zero Hedge:
ValueWalk:
Reuters:
- Target(TGT) breach could cost hundreds of millions, probe starts. The theft of credit and debit card data
from 40 million Target Corp customers could end up
costing hundreds of millions of dollars, but it is unclear who
will bear the expense, lawyers and industry sources said.
Target said on Thursday hackers had stolen the data of
shoppers who visited its stores during the first three weeks of
the holiday season. Americas's third-largest retailer said it
was working with federal law enforcement and outside experts to
prevent similar attacks in the future. It did not disclose how
its systems were compromised.
- Jazz Pharma(JAZZ) to buy Italy's Gentium for $1 bln. Ireland-based Jazz Pharmaceuticals Plc said it would buy Italian biotech company Gentium S.p.A. for about $1 billion to get access to its lead product candidate, Defitelio, a drug used for the treatment of a rare liver condition. The $57 per-share deal is at a premium of 2.4 percent over Gentium's Thursday close of $55.65 on the Nasdaq.
Telegraph:
Yonhap News:
- North Korea Threatens South to Strike Without Prior Notice. North Korea's National Defense Commission commented in a telegraph message to national security office of South Korea's presidential house, citing a South Korean official. South Korea replied that it will sternly punish North Korea if it provokes.
People's Daily:
- China Urges Officials to Hold Frugal Funerals. Party members and
government officials should set an example with simple, civilized
funerals, general offices of the State Council and the Chinese Communist
Party's Central Committee said. Party members and officials are
strictly banned from hosting luxurious funerals or taking advantage of
the occasion to collect condolence money from visitors, citing the
notice.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 122.0 -5.5 basis points.
- Asia Pacific Sovereign CDS Index 101.75 -.5 basis point.
- NASDAQ 100 futures +.19%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- 3Q GDP is estimated to rise +3.6% versus a prior estimate of a +3.6% gain.
- 3Q Personal Consumption is estimated to rise +1.4% versus a prior estimate of a +1.4% gain.
- 3Q GDP Price Index is estimated to rise +2.0% versus a prior estimate of a +2.0% increase.
- 3Q Core PCE is estimated to rise +1.5% versus a prior estimate of a +1.5% gain.
11:00 am EST
- Kansas City Fed Manufacturing Activity for Dec. is estimated to fall to 6.0 versus 7.0 in November.
Upcoming Splits
Other Potential Market Movers
- The Eurozone Consumer Confidence data and the Canadian inflation data could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by financial and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.77 -.22%
- Euro/Yen Carry Return Index 148.38 -.29%
- Emerging Markets Currency Volatility(VXY) 9.09 +.44%
- S&P 500 Implied Correlation 51.96 +1.76%
- ISE Sentiment Index 122.0 -.81%
- Total Put/Call .73 -14.12%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.15 -1.95%
- European Financial Sector CDS Index 88.20 -7.46%
- Western Europe Sovereign Debt CDS Index 61.34 -1.06%
- Emerging Market CDS Index 268.64 +.46%
- 2-Year Swap Spread 8.25 +1.5 basis points
- TED Spread 18.5 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.75 -1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .06% unch.
- Yield Curve 257.0 +2.0 basis points
- China Import Iron Ore Spot $132.70/Metric Tonne -.52%
- Citi US Economic Surprise Index 39.10 -5.0 points
- Citi Emerging Markets Economic Surprise Index -13.4 +.9 point
- 10-Year TIPS Spread 2.15 -1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +9 open in Japan
- DAX Futures: Indicating +5 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech sector longs, index hedges and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Brazil Mid-December Inflation Rises More Than All Forecasts.
Brazil’s consumer prices rose in the month through mid-December by the
most in 11 months, as unemployment tied a record low. Swap rates jumped.
Consumer prices as measured by the IPCA-15 index rose 0.75 percent
in the month through mid-December, the national statistics agency said
in a report published on its website today. That was more than every
estimate from 39 economists surveyed by Bloomberg, whose median forecast
was for a rise of 0.65 percent.
- European Stocks Rise.
European stocks rallied the most in 3 1/2 months as the Federal
Reserve’s decision to slow the pace of its stimulus boosted investor
confidence that the U.S. economic recovery is on course. Saab AB (SAABB)
surged the most in at least 15 years after winning a $4.5 billion order
to supply 36 jet fighters to Brazil’s air force. Amadeus IT Holding SA
jumped to a record after the travel-reservations company said its $500
million purchase of NMTI Holdings Inc. will boost 2013 results. Algeta
ASA also climbed to a record after Bayer AG agreed to acquire the
drugmaker at an increased offer price. The Stoxx Europe 600 Index rose 1.7 percent to 319.44 at
the close, for its biggest two-day gain since June.
- Emerging-Market Stocks Retreat as Turkey Plunges on Corruption.
Emerging-market stocks fell to the
lowest in a month as Turkey’s corruption crisis weighed on the
nation’s shares and Chinese equities retreated on concern higher
funding costs will hurt growth. Turkey’s shares slid the most in the
world as the
government removed Istanbul’s police chief amid a corruption probe. The
Hang Seng China Enterprises Index (HSCEI) lost 1.7 percent on concern
higher funding costs will hurt growth. All but two emerging-market
currencies tracked by Bloomberg weakened, led by the Brazilian real. The
Micex added 0.7 percent as President Vladimir Putin said a decree
pardoning Mikhail Khodorkovsky will be signed soon. Brazil’s Ibovespa
climbed to a one-week high. The MSCI Emerging Markets Index retreated 0.4 percent to 989.01 at 12:41 p.m. in New York.
- Facebook(FB), Zuckerberg Plan to Sell Shares Worth $3.9 Billion. Facebook Inc.
(FB:US) Chief Executive Officer Mark Zuckerberg is selling shares to
help pay taxes, joining the company and board member Marc Andreessen in
an
offering worth about $3.9 billion. About 27 million shares will
be offered by Facebook, with an additional 41.35 million shares by
Zuckerberg and 1.6 million from Andreessen, the company said in a
statement today. Shares of Menlo Park, California-based Facebook fell as
much as 2.7 percent.
CNBC:
ZeroHedge:
ValueWalk:
Business Insider:
NY Times:
- Uninsured Skeptical of Health Care Law in Poll. Americans who lack medical coverage disapprove of President Obama’s
health care law at roughly the same rate as the insured, even though
most say they struggle to pay for basic care, according to the latest
New York Times/CBS News poll. Fifty-three percent of the uninsured disapprove of the law, the poll
found, compared with 51 percent of those who have health coverage. A
third of the uninsured say the law will help them personally, but about
the same number think it will hurt them, with cost a leading concern.
Forbes:
Google Blog:
- Transparency Report: Government removal requests continue to rise.
We launched the Transparency Report in 2010 to provide hard evidence of
how laws and policies affect access to information online. Today, for
the eighth time, we’re releasing new numbers showing requests from
governments to remove content from our services. From January to June
2013, we received 3,846 government requests to remove 24,737 pieces of
content—a 68 percent increase over the second half of 2012. Over the
past four years, one worrying trend has remained consistent: governments
continue to ask us to remove political content. Judges have asked us to remove information that’s critical of them, police
departments want us to take down videos or blogs that shine a light on
their conduct, and local institutions like town councils don’t want
people to be able to find information about their decision-making
processes. These officials often cite defamation, privacy and even
copyright laws in attempts to remove political speech from our services.
In this particular reporting period, we received 93 requests to take
down government criticism and removed content in response to less than
one third of them.
11Alive.com:
- Lockheed Martin(LMT) cuts ties with Boy Scouts over gay leader ban. The
Lockheed Martin Corp. is ending its relationship with the Boy Scouts of
America because the group does not allow gay Scout leaders, company
officials told the Marietta Daily Journal. "While we applaud the
mission of the Boy Scouts and the good things they do in our
communities, their policies that discriminate on the basis of sexual
orientation and religious affiliation conflict with Lockheed Martin policies," said Lockheed spokesman Gordon Johndroe. The reference to "religious affiliation" has to do with the Boy Scouts' ban on atheist members. Marietta's plant contributed about $25,000 to metro Atlanta-area Scouting activities and programs this year. The employee-giving fund called the LM AERO Club contributed another $30,000 this year, Whitaker said.
Reuters:
- Business lobby says recession has pushed Italians to breaking point. Italy's main business lobby group
warned on Thursday that the risk of social breakdown was
growing, despite signs that Italy's two-year recession was
coming to an end. Confindustria, which represents almost 150,000 companies,
said it expected gross domestic product to fall 1.8 percent this
year rather than 1.6 percent.
Financial Times:
- EU launches trade dispute against Brazil. The
EU has launched a potentially explosive trade case against Brazil,
filing papers in the World Trade Organisation against the Latin American
giant for the first time in almost a decade over what it claims are
protectionist taxes levied on cars and other
imports.
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:
