Style Outperformer:
Sector Outperformers:
- 1) Computer Hardware +2.79% 2) Gaming +2.49% 3) HMOs +2.41%
Stocks Rising on Unusual Volume:
- NBIX, EPZM, CRAY, ANIP, CVG, PCYC, VRX, WPRT, SONC, WDAY, RMTI, SYNA, P, SPLK, PVA, SUNE and LNG
Stocks With Unusual Call Option Activity:
- 1) ELNK 2) HA 3) DISH 4) SD 5) EOG
Stocks With Most Positive News Mentions:
- 1) LMT 2) T 3) PCYC 4) INTC 5) GOOG
Charts:
Evening Headlines
Bloomberg:
- Goldman(GS) to JPMorgan(JPM) Say Sell Emerging Markets After 2013 Tumble. Wall Street’s biggest banks say the
slump in emerging-market assets that left equities trailing
advanced-nation shares by the most since 1998 last year will
prove more than a fleeting selloff. Goldman Sachs Group Inc. recommends investors cut
allocations in developing nations by a third, forecasting
“significant underperformance” for stocks, bonds and
currencies over the next 10 years. JPMorgan Chase & Co. expects
local-currency bonds to post 10 percent of their average returns
since 2004 in the coming year, while Morgan Stanley projects the
Brazilian real, Turkish lira and Russian ruble will extend
declines after tumbling as much as 17 percent in 2013. The MSCI
Emerging Markets Index is down 3 percent this year, compared
with a 1.2 percent drop in the developed-market index, and hit a
four-month low yesterday as data from China showed weakness in
manufacturing and services.
- China’s Cabinet Imposes New Rules in Shadow Banking Fight. China's Cabinet imposed new controls
on the multi-trillion-dollar shadow-banking industry with an
order that targets off-the-books loans and shores up enforcement
of current rules, two people familiar with the matter said. The rules include a ban on transactions designed to avoid
regulations, such as moving interbank loans off balance sheets
to reduce reported levels of lending, said the people, who asked
not to be identified because the order hasn’t been made public.
Such operations are part of shadow finance, a term that
describes lending outside the banking system. In a separate step
to reform the system, the bank regulator said it will let as
many as five privately owned lenders start operating this year.
- Rupiah Hits 2008 Low on Taper as Indonesia Markets Dollar Bonds. Indonesia’s rupiah fell to the lowest level since 2008 on concern a foreign-currency shortage in local markets will worsen as the Federal Reserve cuts stimulus. The local currency has lost 0.8 percent since Dec. 18, when the Fed said it will cut its monthly debt purchases, which have spurred fund flows to emerging markets, by $10 billion to $75 billion from January. Indonesia’s sovereign dollar bonds fell as the nation markets new securities to global investors.
- Asian Stocks Decline on Slower U.S. Services Growth.
Asian stocks fell, with the regional benchmark index poised to drop for
a fourth day, as a report showed U.S. service industries expanded less
than expected and raw-material shares led declines. Sinopec Shanghai
Petrochemical Co., an oil processor, slumped 6.3 percent, leading
material shares lower. Oversea-Chinese Banking Corp., Southeast Asia’s
second-biggest lender, fell 1.1 percent in Singapore after it entered
exclusive talks for a possible takeover of Hong Kong’s Wing Hang Bank
Ltd. Li & Fung Ltd., the world’s largest supplier of clothes and
toys to retailers, gained 7.3 percent in Hong Kong as the company called
its 2013 performance “solid.” The MSCI Asia Pacific Index lost 0.2 percent to 138.97 as
of 12:17 p.m. in Tokyo after rising as much as 0.2 percent.
- Rebar Falls as China Imposes Controls on Shadow Banking.
Steel reinforcement-bar futures in Shanghai declined to the lowest
level in more than seven months as China’s Cabinet was said to have
imposed new controls on shadow banking. Rebar for May delivery on the Shanghai Futures Exchange
lost as much as 1.1 percent to 3,475 yuan ($574) a metric ton,
the lowest since the contract’s inception in May, and traded at
3,481 yuan at 10:14 a.m. local time.
- Rubber Extends Losses to 1-Month Low on Chinese Demand Concerns.
Rubber in Tokyo fell for a third day and reached the lowest level in
more than a month amid concern that demand may weaken in China, the
largest consumer. The contract for delivery in June on the Tokyo Commodity Exchange fell as much as 1.6 percent to 258.3 yen a kilogram
($2,477 a metric ton), the lowest level since Nov. 28, before
trading at 258.8 yen at 11:35 a.m. Futures have lost 5.7 percent
in the past two days, heading for the largest drop since June.
- Yellen Confirmed by U.S. Senate to Become Fed Chairman. Janet
Yellen won U.S. Senate confirmation to become the 15th chairman of the
Federal Reserve and the first woman to head the central bank in its
100-year history. Yellen, 67, was confirmed today by a 56-26 vote,
with 11 Republicans supporting her. She’ll replace Ben S. Bernanke,
whose second term as chairman expires Jan. 31, as the Fed trims monthly
bond purchases in a first step toward lessening the unprecedented
stimulus.
Wall Street Journal:
- Slump in Trading Threatens a Wall Street Profit Engine. Industry Could Post 11th Trading Decline in 16 Quarters. The trading boom that helped reshape global
investment banks over the past decade is sputtering, raising fears that
one of Wall Street's biggest profit engines is in peril. Executives
have warned that lackluster markets could lead to year-over-year
declines in fixed-income, commodities and currency trading revenue when
banks begin reporting fourth-quarter results next week. That would mark
the fourth consecutive drop and the 11th in the past 16 quarters.
- Mark Warshawsky: Millionaires on Medicaid. Got a house worth $802,000, lots of savings and a nice car? You might still qualify for benefits. Expanding Medicaid coverage to an estimated nine million more
Americans—as mandated by the Affordable Care Act—reinforces the idea
that Medicaid only serves the poor. That perception is not accurate. And
it distracts from a looming budgetary threat to the program: long-term
care.
Fox News:
MarketWatch.com:
- China’s reforms: The pain begins. Commentary: Analysts warn of bumpy ride ahead.
Is this the year Beijing finally puts its blank-checkbook away?
Investors need to be on the lookout for casualties, as signs emerge that
China is readying to bring its massive debt spree to a close.
CNBC:
- Here’s how bad China’s bad loan problem could get. Steps to curb shadow
banking in China are a positive sign, but a sharp rise in
non-performing loans remains a key risk to the world's second biggest
economy, independent economist Andy Xie told CNBC.
"The trust industry
alone is like 10 trillion renminbi ($1.65 trillion), that industry is in
deep trouble and it's where most non-performing assets will come from," he told CNBC Asia's "Squawk Box."
- US still faces 'too big to fail’: Fed's Gary Stern. (video) The United States and global markets alike are still plagued by the
threat of financial institutions that are "too big to fail," Gary
Stern, former president of the Minneapolis Federal Reserve Bank, told
CNBC on Monday. "We still have a 'too big to fail' problem," he
said, referring to the theory that some financial institutions are so
large that their collapse could send shock waves through the economy.
- Executives spared in JPMorgan's(JPM) Madoff deal, sources say. (video)
JPMorgan Chase is expected to pay approximately $2 billion to settle a
criminal and regulatory investigation into its dealings with Bernard
Madoff, though
no individuals at the bank will be implicated, according to sources
familiar with the agreement.
Zero Hedge:
Business Insider:
AllAboutAlpha:
Reuters:
People's Daily:
- China Telecom Cuts iPhone 5s, 5c, Contract Prices. China Telecom
Corp. cut contract prices for iPhone 5s and 5c, citing an announcement
by the co.'s Beijing branch. The price reductions will have a
negative impact on the sales of China Mobile's iPhones, the report cites
Sandy Shen, an analyst with Gartner Inc., as saying.
Securities Daily:
- China to See Lengthy Cash Crunch in 2014, Researcher Says. China will probably see a relatively lengthy cash squeeze in 2014, on pressure from money demand by local governments and increasing housing credit, China Academy of Social Sciences researcher Yi Xianrong writes in an article today. Yi expects PBOC to maintain a neutral-to-tight monetary policy in 2014.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 134.50 +3.5 basis points.
- Asia Pacific Sovereign CDS Index 109.50 +2.0 basis points.
- NASDAQ 100 futures +.17%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Trade Deficit for November is estimated at -$40.0B versus -$40.6B in October.
Upcoming Splits
Other Potential Market Movers
- The Fed's Rosengren speaking, Fed's Williams speaking, Eurozone Unemployment/PPI data, $30B 3Y T-Note auction, weekly retail sales reports, CES 2014 and the (MNST) Investor Meeting could also impact trading today.
BOTTOM LINE: Asian
indices are mostly lower, weighed down by industrial and technology
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
- Volume: Slightly Above Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.31 -3.27%
- Euro/Yen Carry Return Index 148.28 -.19%
- Emerging Markets Currency Volatility(VXY) 9.41 +.32%
- S&P 500 Implied Correlation 50.13 -2.90%
- ISE Sentiment Index 139.0 +23.0%
- Total Put/Call .71 -21.11%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.86 +.19%
- European Financial Sector CDS Index 81.75 -2.0%
- Western Europe Sovereign Debt CDS Index 54.15 +.29%
- Emerging Market CDS Index 272.83 -.42%
- 2-Year Swap Spread 10.75 unch.
- TED Spread 19.25 +1.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -4.25 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .05% -1 basis point
- Yield Curve 257.0 -3 basis points
- China Import Iron Ore Spot $134.80/Metric Tonne -.15%
- Citi US Economic Surprise Index 49.10 -4.3 points
- Citi Emerging Markets Economic Surprise Index 1.6 +2.0 points
- 10-Year TIPS Spread 2.25 unch.
Overseas Futures:
- Nikkei Futures: Indicating -40 open in Japan
- DAX Futures: Indicating +21 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 50% Net Long
Bloomberg:
- Shadow Banking Risks Exposed by Local Debt Audit: China Credit. China’s
audit of local governments exposed an increased reliance on shadow
banking, swelling the risk of default on 17.9 trillion yuan ($3
trillion) of debt. Bank lending dropped to 57 percent of direct and
contingent liabilities as of June 30 from 79 percent at the end of 2010,
while bonds rose to 10 percent from 7 percent, National Audit Office
data show. Trust financing surged to 8 percent from zero, while other
channels that sidestep loan curbs accounted for the remaining 25 percent. The yield on five-year AA notes, the most
common rating for local government financing vehicles, jumped by
a record 158 basis points last year to 7.6 percent. That exceeds
the 5 percent on emerging-market corporate notes, Bank of
America Merrill Lynch indexes show.
- China Wages Seen Jumping in 2014. China’s
wages are set to increase by 10 percent or more in 2014, driving more
low-cost manufacturers out of the country and boosting consumption, according to analysts at firms including Bank of America Corp.
- Iraq Forces, Tribes May Soon Start Attack to Recapture Fallujah. Iraqi security forces, militias or
tribesmen may soon start an attack to retake Fallujah from al-Qaeda-linked militants after about 9,000 families fled the city,
a government official said. “I believe that a final combat will take place soon,”
Faleh al-Issawi, deputy head of the provincial council of Anbar,
said by phone from Ramadi. “Fallujah city is totally controlled
by militias and this extends to Garma,” a town about 15
kilometers (9 miles) away.
- European Stocks Drop After U.S. Services, Orders Reports.
European stocks fell after a U.S. report that showed weakness in the
services industry, while factory orders rose faster than forecast. Remy
Cointreau SA and Edenred SA each fell at least 2.1 percent after Natixis
SA cut its stock recommendations. Ziggo NV rallied 3.6 percent after
people familiar with the matter said Liberty Global Plc is preparing an
acquisition of the Dutch broadband provider. RSA Insurance Group Plc
jumped 6.2 percent after a report said the insurer’s Irish unit won’t
require further capital injections. Banca Monte dei Paschi di Siena SpA
and Commerzbank AG helped send European lenders higher. The Stoxx Europe 600 Index lost 0.2 percent to 326.98 at the close of trading in London.
- WTI Oil Falls to Five-Week Low on Slower Service Growth. WTI for February delivery slid 53 cents, or 0.6 percent, to
$93.43 a barrel on the New York Mercantile Exchange, the lowest
settlement since Nov. 29. The five-day losing streak is the
longest since September. The grade declined 6.3 percent last
week, the most since June 2012. The volume of all futures traded
was 19 percent below the 100-day average at 2:57 p.m.
- Dollar Snaps Four-Day Advance on Services Report. The dollar fell 0.3 percent to 1.3635 per euro after rising
to $1.3572, the highest level since Dec. 5. The greenback slid
0.6 percent to 104.27 yen, while the Japanese currency advanced
0.2 percent to 142.17 per euro.
Wall Street Journal:
- China Five-Year Government-Bond Yield Hits 16-Year High. China's first auction of government bonds this year resulted in a 16-year-high yield of 4.47% for the five-year debt. The
yield could have been even higher if the government had issued more
than the 10 billion yuan ($1.65 billion) of bonds that the Ministry of
Finance put up for sale Monday. "If the
finance ministry had doubled the bond offering, we may have seen the
auction yield rising to above 4.5%," said a Zhejiang-based bond trader,
who declined to be named. The five-year
government-bond yield was quoted at 4.52% in the secondary market
Monday, up from 3.0906% in late May. The last time the yield for
five-year government debt was higher was in 1998, according to data
provider WIND Info.
Fox News:
MarketWatch:
CNBC:
- Art Cashin warns: 'Pronounced divergence building'. (video) Cashin, UBS' director of floor operations at the NYSE, told CNBC's Bob
Pisani around midday that "the Dow has been stronger than the other
averages... The Nasdaq and the S&P kind of pulled the Dow down
behind them today... We see this in the Russell also. The small caps are
having a difficult 2014."
ZeroHedge:
Business Insider:
NY Times:
- The Bubble Is Back. IN November, housing starts were up 23 percent, and there was cheering
all around. But the crowd would quiet down if it realized that another
housing bubble had begun to grow. The Obama administration’s remedy of choice was the Dodd-Frank Act. It
is the most restrictive financial regulation since the Great Depression —
but it won’t prevent another housing bubble.
- Spain’s Solar Pullback Threatens Pocketbooks. “It seemed so safe,” he said recently. “It was a government guarantee.” But the Spanish government has changed its mind. It plans to pay less, a
lot less. Under legislation that goes into effect this year, it will
drop its per-kilowatt-hour payment system altogether and effectively
impose retroactive cuts in payments. It also plans to make solar power
producers pay a charge on electricity they generate and use themselves, a
measure that angry protesters have named the “sun tax.”
Reuters:
- China makes fresh bid to curb shadow banking, contain debt risk. China's cabinet
has published guidelines strengthening regulation of risky
off-balance-sheet lending in a new effort to address growing financial
risks from an explosion in debt.
The State Council's
guidelines call for tighter regulation of banks' off-balance-sheet
lending and say that trust companies - the biggest non-bank players in
what's called "shadow banking" - should return to their original purpose
as asset managers and not engage in "credit-type" business.
- Moody's could cut Brazil rating outlook if economy disappoints. Moody's
Investors Service could cut Brazil's rating outlook later this year if
economic growth disappoints in the first half of 2014, the firm's senior
credit analyst, Mauro Leos, told Reuters on Monday. If the
Brazilian economy performs as expected, however, Moody's will wait for
the policies of an incoming government that will be elected later this
year to decide on the future of the country's rating, which at "Baa2"
stands only two notches into investment grade. Moody's base scenario
for Brazil in 2014 includes gross domestic product growth of 2 percent
and a primary budget surplus of 2 percent as well.
- U.S. boosting military sales to Iraq to help fight al Qaeda-White House. The White House said on Monday
that the United States is accelerating its military sales and
deliveries to Iraq to help the country fight al Qaeda-linked militants, part of a strategy to isolate the insurgent groups.
The United States is looking to provide additional shipments of
Hellfire missiles as early as this spring, White House spokesman Jay
Carney told reporters in a briefing. Carney said the United States will
provide 10 ScanEagle surveillance unmanned aerial vehicles (UAVs) to
Iraq in upcoming
weeks and 48 Raven surveillance UAVs later this year to help
Iraq track al Qaeda-affiliated groups.
- New regulator Watt signals shift in U.S. housing policy. Mel Watt, who was sworn in on Monday to head the agency that regulates mortgage finance firms Fannie Mae and Freddie Mac, has signaled a new approach to U.S. housing policy that will put more of an emphasis on ensuring access to credit.
Watt, a 68-year-old North Carolina Democrat who spent more
than two decades in Congress, is the first permanent director of
the Federal Housing Finance Agency in four years.
- METALS-Copper steadies near two-week lows as China worries drag.
Copper steadied on Monday as the dollar fell but the metal remained
near a two-week low on concerns about economic recovery in China, which accounts for about 40 percent of global copper demand. Three-month copper on the London Metal Exchange fell
to its lowest since Dec. 24 at $7,278.75 a tonne on Monday,
before closing at $7,325 from $7,315 on Friday.
Telegraph:
Xinhua:
- China Warns Some Risks in Shadow Banking. China warns of risks
from non-compliant wealth management products, reckless trustee
business, financing guarantee and microfinance in shadow banking, citing
a China Banking Regulatory Commission meeting today.
Style Underperformer:
Sector Underperformers:
- 1) Biotech -1.50% 2) Homebuilders -1.43% 3) Airlines -1.32%
Stocks Falling on Unusual Volume:
- SCSS, SDLP, LMCA, HGG, GGT, COLM, CNW, HTHT, FUN, FUL, FSLR, HLS, WFM, PCL, SONC, ACGL, BCR, DL, HXL, MTSC, MWIV, KNDI, CLB, DDD, CELG, AIRM, SRPT, FSLR and BOV
Stocks With Unusual Put Option Activity:
- 1) RSH 2) EWJ 3) COH 4) BBY 5) MON
Stocks With Most Negative News Mentions:
- 1) UNP 2) TWTR 3) BBY 4) CELG 5) IBM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Banks +.63% 2) Gold & Silver +.55% 3) Medical Equipment +.42%
Stocks Rising on Unusual Volume:
- SCTY, SWIR, JOSB, JKS, STJ, P, XPO and Z
Stocks With Unusual Call Option Activity:
- 1) ASH 2) SWC 3) SIRI 4) HUM 5) VRNG
Stocks With Most Positive News Mentions:
- 1) WYNN 2) T 3) GOOG 4) FB 5) TWTR
Charts:
