Friday, January 03, 2014

Bear Radar

Style Underperformer:
  • Large-Cap Growth -.50%
Sector Underperformers:
  • 1) Coal -1.63% 2) Gaming -1.40% 3) Telecom -.94%
Stocks Falling on Unusual Volume:
  • GYRO, CNMD, RNR, SWIR, RDEN, HLF, AER, HTHT, IOC, GM, EXXI, PRE, CTRP, GNC, CCOI, WGP, NUS, ED, ACGL, CW, NM, CEO, UVE, TM and TMUS
Stocks With Unusual Put Option Activity:
  • 1) GNK 2) ACI 3) EWY 4) MDT 5) BAC
Stocks With Most Negative News Mentions:
  • 1) GM 2) HLF 3) FB 4) EBAY 5) DYN
Charts:

Bull Radar

Style Outperformer:
  • Small-Cap Growth +23%
Sector Outperformers:
  • 1) Airlines +2.19% 2) Hospitals +1.72% 3) Drugs +.66%
Stocks Rising on Unusual Volume:
  • FEYE, CCIH, YY, XONE and DF
Stocks With Unusual Call Option Activity:
  • 1) HCA 2) CYH 3) MDT 4) XOMA 5) PLUG
Stocks With Most Positive News Mentions:
  • 1) FEYE 2) DAL 3) LMT 4) HTZ 5) AAPL
Charts:

Friday Watch

Evening Headlines 
Bloomberg: 
  • China’s Runaway Train Is Running Out of Track. A financial drama is unfolding in China as the new year begins. Last week, for the second time in six months, interest rates in the critical interbank lending market spiked above 10 percent, prompting fears of a liquidity crisis that would trigger mass defaults and cripple the world’s second-largest economy. Western investors largely ignored the cash crunch and failed to grasp its potential significance. Although the situation has largely eased after the People’s Bank of China hastily injected at least $55 billion into the market, that isn’t the end of the story. These repeated crises are a sign that the foundations of China’s investment-driven growth model are crumbling -- with unsettling implications for the rest of the global economy
  • Japan Isn’t a Good Buy in 2014. History shows Japanese leaders with sub-50 percent support rates often get little done and tend not to last very long. And Abe’s numbers could be even worse now. The Mainichi newspaper poll closed two days before he angered the world with a provocative visit to Yasukuni Shrine, an action most Japanese didn’t support.
  • Pimco Sees Dim Sum Refinancing Boom on Cash Crunch: China Credit. Pacific Investment Management Co. sees a 2014 boom in issuance outside the mainland by Chinese companies, driven by a record amount of Dim Sum bonds set to expire and a cash crunch in domestic markets. Offshore yuan notes maturing this year, excluding certificates of deposits, will more than double to 91.1 billion yuan ($15.1 billion), according to data compiled by Bloomberg. The 3.95 percent average yield on Dim Sum bonds compares to a record 6.29 percent onshore and the 4.76 percent for dollar securities in Asia, according to Bank of America Merrill Lynch indexes that track yuan data since 2004.
  • India’s Rates Seen Elevated as Price Surge Risks Growth: Economy. Indian interest rates will remain elevated as long as surging inflation imperils economic growth, a deputy governor of the country’s central bank said. “If you are having continuously high inflation, it will kill your growth,” the Reserve Bank of India’s K.C. Chakrabarty told Bloomberg TV India yesterday. “If interest rates are high, that’s because inflation is high, and unless inflation is brought down, interest rates will not come down.”   
  • Chinese Shares in Hong Kong Fall to 7-Week Low; ICBC Declines. Mainalnd Chinese shares trading in Hong Kong sank, heading for a seven-week low, as a drop in a gauge of China’s services industries fueled concern growth is slowing in the world’s second-largest economy. Industrial & Commercial Bank of China Ltd., the nation’s bigggest lender, decreased 2.1 percent to head for the lowest close since August. Tencent Holdings Ltd., Asia’s largest internet company, slipped 0.6 percent, retreating from an all-time high. China Shenhua Energy Co. declined 4.2 percent, leading energy shares lower. Zhaojin Mining Industry Co., China’s No. 2 gold producer, gained 2.2 percent as the bullion’s price rose to a two-week high. The Hang Seng China Enterprises Index (HSCEI) of mainland shares traded in Hong Kong, also known as the H-share index, slumped 2.5 percent to 10,447.37 as of 11:01 a.m. in Hong Kong. A close at that level would be the lowest since Nov. 14. The Hang Seng Index (HSI) lost 1.8 percent to 22,923.13. All of the gauge’s 50 members declined.
  • Asian Stocks Fall While Credit Risk Climbs With Gold, Yen. Asian stocks dropped, with a regional index headed for its biggest loss in six weeks, and credit risk increased after a gauge of China’s service industries fell. The yen climbed with gold while emerging-market currencies weakened. The MSCI Asia Pacific Excluding Japan Index lost 1.2 percent at 11:41 a.m. in Hong Kong, while the Hang Seng China Enterprises Index tumbled 2.4 percent
  • Euro Set for Weekly Drop; Yen Climbs on Repatriation Speculation. The euro was set for a weekly drop after an advance in 2013, amid bets policy makers in the region will add to measures supporting growth. The yen rose amid speculation the nation’s investors will repatriate earnings. The extra yield 10-year U.S. Treasuries offered over similar government debt for Germany, the 18-nation region’s biggest economy, was near a seven-year high before Federal Reserve Chairman Ben S. Bernanke speaks today and European Central Bank officials meet next week. The Australian dollar weakened briefly after data showed a gauge of Chinese service industries declined.
  • Rebar Declines in Shanghai After Biggest Producers Lower Prices. Steel reinforcement-bar futures fell in Shanghai, set for a fourth weekly loss, after the biggest steel producers across China cut prices amid slowing demand. Rebar for May delivery on the Shanghai Futures Exchange dropped as much as 1.2 percent to 3,546 yuan ($586) a metric ton, and was at 3,550 yuan at 10:38 a.m. local time. Futures are down 1.8 percent this week.
  • Gold Heads for Best Week Since October on Asian Demand Outlook. Gold headed for the best weekly gain since October on speculation that demand will increase in Asia, the largest consuming region, prompting investors to reverse bearish bets. Platinum rose to the highest price since November. Bullion for immediate delivery climbed as much as 1 percent to $1,237.03 an ounce, the highest level since Dec. 18, and was at $1,229.71 at 9:34 a.m. in Singapore, 1.4 percent higher this week.
  • Iraq Violence With al-Qaeda Ties Increases the Pressure on U.S. Militants with ties to al-Qaeda threatened today to take over towns in Iraq’s predominantly Sunni Muslim Anbar province from Shiite Prime Minister Nouri al-Maliki’s government, after 2013 ended with the most civilian deaths and injuries in five years. Civilian deaths in Iraq, including police casualties, totaled 7,818 last year, rivaling the 6,787 in 2008, according to data compiled by the United Nations Assistance Mission for Iraq. An additional 17,981 civilians were injured last year, compared with 20,178 in 2008, the UN found.
  • Facebook(FB) Sued Over Alleged Scanning of Private Messages. When users compose messages that include links to a third-party website, Facebook scans the content of the message, follows the link and searches for information to profile the message-sender’s Web activity, violating the Electronic Communications Privacy Act and California privacy and unfair competition laws, according to the suit. The practice compromises privacy and undermines Facebook’s promise of “unprecedented” security options for its messaging function, two Facebook users said in the complaint filed in federal court in San Jose, California.
Wall Street Journal: 
  • Hezbollah Upgrades Missile Threat to Israel. Components Said to Have Already Been Moved to Lebanon from Syria. U.S. officials believe members of Hezbollah, the militant group backed by Iran, are smuggling advanced guided-missile systems into Lebanon from Syria piece by piece to evade a secretive Israeli air campaign designed to stop them. The moves illustrate how both Hezbollah and Israel are using Syria's civil war as cover for what increasingly is seen as a complex and high-stakes race to prepare for another potential conflict—their own—in ways that could alter the region's military balance.
  • Snowstorm Rolls Into the Northeast. Frigid Temperatures and Heavy Accumulation Expected to Snarl Northeast. The Northeast braced for a storm that was expected to blanket the region in snow and frigid temperatures Friday, a day after the same system swept through the Midwest, clogging roadways and snarling commutes.
  • Beirut Bomb Hits Hezbollah Stronghold. A car bomb ripped through a Hezbollah stronghold in a crowded district of southern Beirut on Thursday, days after a blast in another part of the Lebanese capital killed a politician who opposed the Shiite political and militant group. Thursday's bombing, which killed five people, drew warnings from officials across Lebanon's divided political spectrum that the country was teetering on the edge of sectarian warfare, threatening the kind of tit-for-tat killings that marked the country's 1975-90 civil war.
Fox News: 
  • ObamaCare brings new taxes, fees for 2014. Get ready for the next wave of ObamaCare fees. With the launch of coverage under the health care law on Wednesday, a new set of taxes and fees is kicking in this year -- as part of the hundreds of billions of dollars the government intends to raise over the next decade to help pay for the program.
MarketWatch.com: 
  • It may soon be time to go for the gold. Something tells me we might be experiencing the give-up phase for gold. By that I mean a point in the gold price cycle when just about everyone gives up on the possibility that gold prices will ever rise again. Which could mean the time to buy is here.
CNBC: 
Zero Hedge: 
Business Insider:
  • America's Most Popular Lightbulbs Are Going Off The Market. Soon you won't have much of a choice than to buy energy-efficient lightbulbs — the government ban on the production of 40- and 60-watt incandescent bulbs has gone into effect for the new year. These lightbulbs account for more than half of the lightbulbs purchased in the U.S., according to Sustainable Business.
Chicago Tribune: 
  • Retired state workers sue over Illinois pension changes. A group representing retired state workers on Thursday filed the second lawsuit challenging sweeping changes to the state’s public employee pension system, arguing the measure violates a clause in the Illinois Constitution intended to protect retirement benefits by “gutting” annual cost-of-living increases.
The Blaze:
Reuters:
  • FireEye buys cyber forensics firm Mandiant for about $1 billion. Cybersecurity company FireEye Inc has acquired Mandiant Corp, the computer forensics specialist best known for unveiling a secretive Chinese military unit believed to be behind a series of hacking attacks on U.S. companies. FirEye shares jumped more than 20 percent after Thursday's announcement of the $1.05 billion cash-and-stock deal, which FireEye said closed on Monday. It unites two companies with relatively new technologies for thwarting cyber attacks, and brings together two of the most-respected executives in the security industry: FireEye CEO Dave DeWalt and Mandiant founder Kevin Mandia.
Financial Times:
  • ‘Frontier’ fund sales to retail investors face crackdown. The Financial Industry Regulatory Authority is to crack down on brokers pushing emerging market “frontier” funds and other higher-risk products on unsophisticated retail investors, according to the regulator’s annual preview of its priorities. Announcing its agenda for 2014, Finra said US investors were not being given proper information about the risk of emerging market funds, exchange traded funds and transfers from their 401k retirement plans.
Telegraph:
  • IMF paper warns of 'savings tax' and mass write-offs as West's debt hits 200-year high. Debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, warns IMF paper. Much of the Western world will require defaults, a savings tax and higher inflation to clear the way for recovery as debt levels reach a 200-year high, according to a new report by the International Monetary Fund. The IMF working paper said debt burdens in developed nations have become extreme by any historical measure and will require a wave of haircuts, either negotiated 1930s-style write-offs or the standard mix of measures used by the IMF in its “toolkit” for emerging market blow-ups. “The size of the problem suggests that restructurings will be needed, for example, in the periphery of Europe, far beyond anything discussed in public to this point,” said the paper, by Harvard professors Carmen. 
Evening Recommendations
  • None of note
Night Trading
  • Asian equity indices are -1.5% to -.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 130.50 +1.5 basis points.
  • Asia Pacific Sovereign CDS Index 106.0 +.75 basis point. 
  • FTSE-100 futures -.01%.
  • S&P 500 futures -.09%.
  • NASDAQ 100 futures -.08%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (LNN)/.91
Economic Releases
Afternoon:
  • Total Vehicle Sales for December are estimated to fall to 16.0M versus 16.31M.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Bernanke speaking, Fed's Stein speaking, Fed's Plosser speaking, Fed's Lacker speaking, UK Construction PMI and the ISM New York for December could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and technology 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.

Thursday, January 02, 2014

Stocks Falling into Final Hour on Rising Emerging Markets Debt Angst, Surging Yen, Technical Selling, Transport/Technology Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Almost Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 14.48 +5.69%
  • Euro/Yen Carry Return Index 149.05 -1.28%
  • Emerging Markets Currency Volatility(VXY) 9.58 +3.79%
  • S&P 500 Implied Correlation 51.15 +2.71%
  • ISE Sentiment Index 82.0 -46.41%
  • Total Put/Call .87 +33.85%
  • NYSE Arms 1.12 +46.76% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 63.34 +1.58%
  • European Financial Sector CDS Index 85.02 -2.49%
  • Western Europe Sovereign Debt CDS Index 56.0 -6.11%
  • Emerging Market CDS Index 278.46 +1.82%
  • 2-Year Swap Spread 10.25 -.25 basis point
  • TED Spread 18.25 +.25 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -3.5 -.25 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .06% -1.0 basis point
  • Yield Curve 260.0 -5.0 basis points
  • China Import Iron Ore Spot $135.0/Metric Tonne +.6%
  • Citi US Economic Surprise Index 53.30 +1.1 points
  • Citi Emerging Markets Economic Surprise Index -4.10 +2.3 points
  • 10-Year TIPS Spread 2.25 +2.0 basis points
Overseas Futures:
  • Nikkei Futures: Indicating -275 open in Japan
  • DAX Futures: Indicating -11 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my index hedges and emerging markets shorts 
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 25% Net Long

Today's Hedlines

Bloomberg: 
  • China LGFV Sells First Dollar Bond as Yuan Borrowing Costs Rise. Shanghai Chengtou Corp. sold the first onshore dollar-denominated bond by a local-government financing vehicle in China as yuan borrowing costs surge. The Shanghai interbank offered rate, or Shibor, for six-month yuan loans has climbed 71 basis points since the end of November to 4.93 percent, according to the National Interbank funding Center. In contrast, six-month dollar Libor has held at 0.35 percent, according to data compiled by Bloomberg. Local-government debt swelled to 17.9 trillion yuan ($2.96 trillion) as of June, compared with 10.7 trillion yuan at the end of 2010, according to data compiled by the National Audit Office
  • Indian Rupee Falls From Two-Week High as Manufacturing PMI Drops. India’s rupee fell from the highest level in two weeks as a drop in a manufacturing gauge sparked concerns about growth in Asia’s third-largest economy. A purchasing managers’ index released by HSBC Holdings Plc and Markit Economics was at 50.7 in December, lower than November’s 51.3.
  • European Stocks Retreat as RWE Leads Utilities Lower. European stocks dropped, following their biggest annual advance since 2009, as utilities declined, while a report showed U.S. manufacturing slowed last month. RWE AG slipped 3.6 percent after Handelsblatt reported that the German utility may ask shareholders to give it the option to raise capital. CGG SA fell 3 percent after UBS AG lowered its rating on the surveyor of oilfields. Fiat (F) SpA rallied the most since April 2009 after agreeing to buy the rest of Chrysler Group LLC, enabling the Italian and U.S. companies to merge. The Stoxx Europe 600 Index slipped 0.7 percent to 325.82 at the close in London, its largest decline in two weeks. Their biggest increase since 2009 sent the Stoxx 600 to 15.4 times its constituents’ projected earnings, up from 12.7 times at the beginning of 2013
  • WTI Crude Falls. WTI for February delivery fell $2.10, or 2.1 percent, to $96.32 a barrel at 12:10 p.m. on the New York Mercantile Exchange. The contract touched $96.30, the lowest level since Dec. 16. The volume of all contracts traded was 3.4 percent lower than the 100-day average for the time of day.
  • Euro Falls Versus Dollar on Bets Rally Is Overdone; Real Drops. The yen gained after dropping to the lowest level since 2008 against the dollar as Bank of Japan Governor Haruhiko Kuroda said policy makers will continue stimulus until inflation stabilizes at 2 percent. The euro dropped versus most major peers a day after Latvia became the currency bloc’s 18th member. Brazil’s real declined to a four-month low and the Turkish lira weakened to a record.
  • Euro Supporter Credit Suisse Joins Bears: Currencies. Credit Suisse Group AG went against the consensus in June and correctly called the euro’s rally. Now, the bull has turned into a bear, with the firm predicting the common currency’s biggest annual drop in almost a decade
  • Bomb Explodes in Hezbollah’s Lebanese Stronghold: NNA. A car bomb exploded in the stronghold of Hezbollah in south Beirut, killing four people and wounding nine in the latest attack on the Iranian-backed group since it acknowledged joining the conflict in neighboring Syria.
  • Bonus-Boosting Rally in U.S. Bank Stocks Seen Fading. Shares of U.S. financial firms just staged their biggest annual rally since 1997, creating a bonanza for Wall Street employees who received bonuses in deferred stock. The new year doesn’t hold the same promise. The rise in share prices that began in October 2011 has been a boon to traders and dealmakers at firms including Morgan Stanley (MS) that retooled bonuses after the financial crisis to include more deferred stock. The gains may slow as valuations near or exceed historic norms and the Federal Reserve phases out a policy that suppressed interest rates and boosted equities. “It could be difficult for stock prices to generate similar gains in 2014,” Terry McEvoy, an analyst at Oppenheimer & Co., said in an interview. Financial firms are still operating in “a challenging environment to grow revenue,” he said. 
  • Mortgage Rates in the U.S. Increase to Highest Since September. U.S. mortgage rates rose to the highest since September, increasing borrowing costs for homebuyers as prices climbed across the country. The average rate for a 30-year fixed mortgage was 4.53 percent this week, up from 4.48 percent, according to a statement today from Freddie Mac. (FMCC:US) The average 15-year rate climbed to 3.55 percent from 3.52 percent, the McLean, Virginia-based mortgage-finance company said. 
Wall Street Journal: 
  • Turkish Lira, South African Rand Tumble. First Trading Day of New Year Sparks Renewed Selloff in Emerging-Market Assets. The Turkish lira sank to an all-time low Thursday as the new year's first trading day sparked a renewed selloff in emerging-market assets. The South African rand also tumbled, hitting a 4½-year low against the dollar, with the repercussions of last month's decision by the U.S. Federal Reserve to scale back its bond-buying stimulus program continuing to echo through financial markets. 
  • One Bear’s Gloomy Forecast: Stocks Down 20% in 2014. That view comes courtesy of Peter Boockvar, managing director and chief market analyst at the Lindsey Group, who on Thursday predicted the S&P 500 could drop 15% to 20% in 2014 and finish the year between 1550 and 1600.
Fox News: 
  • Civilian death toll in Iraq highest in years, fueling concern of Al Qaeda 'resurgence'. Violence in Iraq soared in 2013 to levels not seen in years, U.N. officials reported this week, stoking concerns that the country is descending into the kind of sectarian bloodshed that gripped the country before the U.S. troop surge. The United Nations said 7,818 civilians were killed in 2013, a return to 2008 levels. The startling figure follows warnings from lawmakers and analysts that the violence threatens to undo hard-fought gains by the United States. "The level of indiscriminate violence in Iraq is unacceptable," U.N. Special Representative Nickolay Mladenov said in a statement, calling on the Iraqi government to curb "this infernal circle."
ZeroHedge:
ValueWalk:
Business Insider:
Minyanville:
Seeking Alpha:
  • The Fed's Betrayal Of The Middle Class. (graph) In September of 2012 the Fed announced a new QE program - QE3. It didn't make sense to me that the Fed would be adding more liquidity to a banking system that was already overflowing with liquidity. At that point it was obvious to me that Fed policy had little to do with rejuvenating the economy.
re/code:
Telegraph:
Xinhua:
  • Vice Premier Says China to Stick to Family Planning. Vice Premier Liu Yandong says China will stick to its family planning policy and punish those who violate the laws.

Bear Radar

Style Underperformer:
  • Small-Cap Growth -1.60%
Sector Underperformers:
  • 1) Steel -2.60% 2) Computer Hardware -1.82% 3) Homebuilders -1.81%
Stocks Falling on Unusual Volume:
  • GYRO, SEMG, RNR, LAMR, RGEN, ICLD, SWFT, SNY, TTF, SOXX, TEO, LVNTA, ADEP, UIHC, ANIK, AAXJ, CMGE, GIL, MPLX, VALE, VXUS, TDW, COLM, PSXP, ABB, KS, LNKD, AMBA, ISIL, ATHL, ZLTQ and ACET
Stocks With Unusual Put Option Activity:
  • 1) EWY 2) UNG 3) SLB 4) MGM 5) BHI
Stocks With Most Negative News Mentions:
  • 1) WFC 2) AMZN 3) INTC 4) EBAY 5) ADI
Charts: