Style Outperformer:
Sector Outperformers:
- 1) Steel +1.49% 2) Gold & Silver +1.18% 3) HMOs +.72%
Stocks Rising on Unusual Volume:
- FSL, EZPW, PRTA, MDVN, POL, LIVE, BABY, MTOR, RKT, FSL, ONVO, EFII and MPC
Stocks With Unusual Call Option Activity:
- 1) SGMO 2) VRNG 3) WLP 4) SLCA 5) RFMD
Stocks With Most Positive News Mentions:
- 1) DOW 2) X 3) IBM 4) BA 5) WMT
Charts:
Evening Headlines
Bloomberg:
- Biggest Money Fund Shuns Companies on Default Risk: China Credit. China’s
biggest money-market fund has cut its holdings of corporate debt by
more than 50 percent and sought safety in deposits as rising borrowing
costs increase the threat of default. “We won’t touch high-risk bonds that can have credit
risks,” said Wang Dengfeng, Beijing-based manager at Tianhong
Asset Management Co., which oversees the Yu’E Bao fund sold
online by Internet billionaire Jack Ma. “Liquidity will remain
relatively tight this year, as deleveraging continues to be the
central bank’s focus. Authorities’ regulation of the interbank
business and shadow banking may result in a period of pain.”
- Citic Group Unit May Invest in Trust Product, Morning Post Says. A
unit of Citic Group Corp., a Chinese state-backed conglomerate, may
take part in bailing out investors in a troubled 3 billion-yuan ($496
million) trust product, Oriental Morning Post reported. The
transaction is under way, the newspaper reported yesterday, citing a
person close to Industrial & Commercial Bank of China Ltd. (601398)
The person declined to give the name of the unit
or the amount it plans to invest, according to the report.
- China Starts Briefing Officials on Zhou Probe, Morning Post Says. China
has started briefing officials
about a corruption investigation of Zhou Yongkang, the nation’s former
security chief, paving the way for a public announcement soon, the South
China Morning Post said. The briefings indicate that the probe of
the former Politburo Standing Committee member is in its “final stage”
and results may be disclosed as soon as after the Lunar New Year
break, which ends next week, the Hong Kong-based newspaper said,
citing two unidentified people who received the information. The
investigation focused solely on financial issues and
corruption, not on any larger offenses, and the “amount of
money involved in the case would be far less than some reports
have suggested,” the newspaper said.
- Chinese Homebuyers Thronging Sydney Create Mini-Bubble Frenzy.
Such buying by locally resident Chinese and those from mainland China
is inflating housing bubbles in and around Sydney, where prices in some
suburbs have surged as much as 27 percent in the past year. That’s
almost three times faster than the overall market. Many of the
neighborhoods with the biggest price gains “are areas that are popular
with Chinese buyers,” said Andrew Wilson, senior economist at real
estate data firm Australian Property Monitors. “Some of these suburbs
are seeing price growth that we haven’t seen in Sydney since the early
2000s.” The proportion of foreigners purchasing new homes in Australia
more than doubled to 12.5 percent in the three months to September, from
5 percent throughout most of 2011, according to a survey of more than
300 property professionals by National Australia Bank Ltd.
- Turkey Raises Rates to End Lira Fall as Basci Defies Erdogan. Turkey's central bank raised all its main interest rates at an emergency
late-night meeting in an effort to shore up the lira, resisting
government pressure and reversing years of policy aimed at stoking growth. The currency surged after the bank raised the one-week repo rate to 10 percent from 4.5 percent. Investors should treat that as the benchmark, the Ankara-based bank said on its website at midnight,
promising to “simplify” policy after an experiment in using a variety of
rates left many analysts baffled.
- Asian Stocks Snap 4-Day Rout After Turkey Rate Increase.
Asian stocks rose, with the regional benchmark index on course for its
first gain in five days, after Turkey’s central bank more than doubled
interest rates to arrest a currency slide that roiled global markets.
Honda Motor Co., which gets 83 percent of its car sales outside Japan,
gained 2.2 percent as the yen weakened against the dollar. Atlas Iron
Ltd. (AGO) climbed 7.6 percent in Sydney after the producer of the metal
used to make steel raised its production target. Advantest Corp., a
maker of electronic measuring instruments, sank 7.3 percent in Tokyo
after widening its full-year net loss forecast. The MSCI Asia Pacific Index advanced 1.1 percent to 135.74
as of 11:01 a.m. in Tokyo, with all 10 industry groups in the
measure rising.
- Rubber Rebounds From 16-Month Low as Weaker Yen Raises Appeal. Rubber rallied from the lowest level
in 16 months as Japan’s currency weakened against the dollar before the U.S. Federal Reserve ends a policy meeting, boosting
the appeal of yen-denominated futures. The contract for delivery in July, the most-active by
volume, climbed to 233.1 yen a kilogram ($2,258 a metric ton) on
the Tokyo Commodity Exchange by 11:40 a.m. local time. Futures
slipped into a bear market yesterday, settling at 226.7 yen, the
lowest level since September 2012.
- Rebar Rises for First Time in Three Days on Production Cost Gain.
Steel reinforcement-bar futures in Shanghai rose for the first time in
three days as a rebound in iron ore prices increased production costs. Rebar for May delivery gained as much as 0.5 percent to 3,448 yuan ($570) a metric ton before trading at 3,439 yuan at
11:06 a.m. local time on the Shanghai Futures Exchange. The
contract has declined 3.7 percent in January.
- Too-Big-to-Fail Plan for EU Banks Seen Too Late to Win Approval. Michel Barnier, the European Union’s
financial services chief, faces opposition as he prepares to
unveil plans to curb the activities of about 30 of the bloc’s
biggest banks to prevent them being too big to fail. While France
and Germany (GDBR10) say parts of today’s proposals may hamper lending
and threaten an exodus of banking services, European Parliament
lawmakers argue the plans have simply come
too late for them to review and approve ahead of May elections.
Many will have left office or switched jobs by the time the
assembly gets a chance to vote on the measures.
- AT&T(T) Forecasts Profit on Low End of Estimates Amid Rivalry. AT&T
Inc. (T:US), the second-largest U.S. wireless carrier, forecast 2014
profit on the low end of analysts’ estimates as price competition heats
up with T-Mobile US Inc. Earnings per share will grow this year at a “mid-single-digit” rate, AT&T said today. That compared with analysts’
estimates for an increase of 7 percent, according to data
compiled by Bloomberg. Sales will climb 2 percent to 3 percent,
AT&T said, compared with analysts’ 2 percent projection.
Wall Street Journal:
- Republicans Criticize Obama's Push to Use Executive Power. GOP Lawmakers Accuse President of Overreaching His Authority in Use of 'Pen and Phone'. President
Barack Obama's new drive to use executive power to advance his policy
goals is drawing fire from Republicans who accuse him of overreaching
his authority. "House Republicans will continue to look closely at
whether the president is faithfully executing the laws, as he took an
oath to do," House Speaker John Boehner (R., Ohio) said.
- Ted Cruz: The Imperial Presidency of Barack Obama. In the nation's history, there is simply no precedent for an American president so wantonly ignoring federal law. Of all the troubling aspects of the
Obama
presidency, none is more dangerous than the president's
persistent pattern of lawlessness, his willingness to disregard the
written law and instead enforce his own policies via executive fiat. On
Monday, Mr. Obama acted unilaterally to raise the minimum wage paid by
federal contracts, the first of many executive actions the White House
promised would be a theme of his State of the Union address Tuesday
night.
Fox News:
- Obama vows to act without Congress in 2014, amid second-term woes. President Obama vowed Tuesday to use the power of the pen to chip
away at his agenda in 2014, making clear he’ll sidestep Congress through
executive actions while also lowering his sights for what is achievable
at this stage in his presidency. In his State of the Union address, Obama stopped short of proposing
any sweeping new initiatives. He renewed his call for Congress to
approve an immigration overhaul “this year,” but for the most part
narrowed his focus to smaller-ticket items he’s vowing to do on his own.
Zero Hedge:
Business Insider:
CNN:
- Yahoo(YHOO) shares sink as sales and profit continue to slide. Yahoo's core business shows no signs of improving after the company once again announced lower earnings and sales Tuesday.
Sales of banner and video ads slipped 6% in the fourth quarter and
search ad sales fell 4%. Yahoo (YHOO, Fortune 500) was once the Web's
advertising leader, but over the past several years has fallen behind
rivals Google (GOOG, Fortune 500) and Facebook (FB, Fortune 500).
NY Times:
- Hedge Funds Sniff for Even Bigger Payouts From Banks. One of the biggest bets on Wall Street rests on a theory that also deeply unsettles Wall Street. The provocative theory is that the big banks
have not paid enough in recent legal settlements to make amends for
their role in stoking the subprime housing boom and bust. Hedge funds,
contending that the banks have so far underpaid, have bought subprime
mortgage-backed bonds, which they hope will rise in value. That would
happen if Wall Street banks ultimately pay out a lot more money to
settle other, more stringent litigation tied to these bonds. And the
hedge funds holding the bonds may often be behind these more demanding
lawsuits.
Telegraph:
Kyodo:
- Biden in
Mid-Dec. Asked Abe Not to Visit Yasukuni Shrine. U.S. Vice President Joe
Biden asked Japanese PM Shinzo Abe to avoid visiting the war shrine in a
teleconference on Dec. 12, citing people familiar with the matter. Abe replied he would make the final decision by himself.
Evening Recommendations
Night Trading
- Asian equity indices are +.50% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 141.0 -9.0 basis points.
- Asia Pacific Sovereign CDS Index 112.75 -4.75 basis points.
- NASDAQ 100 futures +.50%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,560,000 barrels versus a +990,000 barrel gain the prior week.
Gasoline supplies are estimated to rise by +1,370,000 barrels versus a
+2,123,000 barrel gain the prior week. Distillate supplies are estimated
to fall by -2,125,000 barrels versus a -3,212,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.49% versus a -3.5% decline the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
- The Fed's QE3 Pace for January is estimated to fall to $65B versus $75B in December.
Upcoming Splits
Other Potential Market Movers
- The Japan Retail Trade data, German GFK Consumer Confidence, weekly MBA mortgage applications report and the (KMP) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by consumer 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: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 16.04 -7.92%
- Euro/Yen Carry Return Index 146.55 +.20%
- Emerging Markets Currency Volatility(VXY) 9.75 -.61%
- S&P 500 Implied Correlation 57.18 -2.31%
- ISE Sentiment Index 138.0 +5.34%
- Total Put/Call .76 -11.63%
Credit Investor Angst:
- North American Investment Grade CDS Index 70.22 -3.26%
- European Financial Sector CDS Index 99.41 -4.88%
- Western Europe Sovereign Debt CDS Index 54.0 -1.82%
- Asia Pacific Sovereign Debt CDS Index 112.27 -4.49%
- Emerging Market CDS Index 323.20 -3.83%
- 2-Year Swap Spread 14.50 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.0 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $123.90/Metric Tonne -.32%
- Citi US Economic Surprise Index 52.0 -7.0 points
- Citi Emerging Markets Economic Surprise Index 8.0 +.9 point
- 10-Year TIPS Spread 2.14 unch.
Overseas Futures:
- Nikkei Futures: Indicating +158 open in Japan
- DAX Futures: Indicating +53 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- China’s Rescue of Troubled Trust May Stoke Risk-Taking. China’s eleventh-hour rescue of wealthy investors in a
high-yield trust threatens to drive more money into the nation’s $6
trillion shadow-banking industry, undermining regulators’ efforts to
deter excessive risk-taking. Industrial & Commercial Bank of
China Ltd., the nation’s largest lender, yesterday told customers who
had invested in the 3 billion-yuan ($496 million) trust product that
they can sell their rights to unidentified buyers to recoup the
principal. Some clients plan to visit ICBC branches to demand more
interest ahead of tomorrow’s 5 p.m. deadline for accepting the offer,
according to Du Ronghai, a Guangzhou-based investor. Averting the
nation’s biggest trust default may reinforce investors’ belief in
implicit guarantees and the government’s backing of such risky products,
stoking their appetite for products in the $1.67 trillion trust market.
The bailout underscores the pressure on authorities to maintain
financial and social stability even as they aim to prune the
government’s role in the world’s second-largest economy and curtail
debt.
- Santander, BBVA Face Profit Drain on Emerging Currencies. Banco Santander
SA (SAN) and Banco Bilbao Vizcaya Argentaria SA (BBVA), Spain’s biggest
banks, face a fresh risk to earnings as the slump in emerging market
currencies threatens to slow growth from Brazil to Turkey. Santander
relies on consumer banking in Latin America for more than a third of
profit, while BBVA has made Turkey, whose lira is the second-worst
performer against the euro over the last three months, a centerpiece of
growth plans. Santander reports fourth-quarter results on Jan. 30
and BBVA a day later. Rio Olympic Infrastructure Costs of $2.3 Billion
Are Set to Rise.
- Rio Olympic Infrastructure Costs of $2.3 Billion Are Set to Rise. Brazilian
authorities today
announced 5.6 billion reais ($2.3 billion) will be spent on
infrastructure directly related to the 2016 Rio de Janeiro Olympic Games
and those costs will rise as projects are added. The announcement
comes months behind schedule, and after pressure on public bodies to
reveal exactly how much it will cost for Rio to be the first South
American city to host the
quadrennial showpiece. Delays and cost overruns to several
projects related to this year’s soccer World Cup have sharpened
the focus on the Olympics.
- European Stocks Rise as Siemens Advances on Profitability.
European stocks advanced, following their largest three-day slump in
seven months, as mining companies climbed and banks rebounded from a
three-week low. BHP Billiton Ltd. and Rio Tinto Group both rose more
than 1 percent. Banco Santander SA, which generates most of its sales
from Latin America, gained 1.6 percent to halt an eight-day losing
streak. F&C Asset Management Plc (FCAM) jumped 6.1 percent after
Bank of Montreal agreed to buy the owner of the U.K.’s oldest investment
fund for 708 million pounds ($1.2 billion). The Stoxx Europe 600 Index increased 0.7 percent to 324.22
at the close of trading.
- WTI Rises for First Time in Three Days on U.S. Weather.
WTI for March delivery rose as much as 69 cents to $96.41 a
barrel and was at $96.28 as of 1:20 p.m. London time in electronic
trading on the New York Mercantile Exchange. The contract fell 1 percent
to $95.72 yesterday, the lowest price since Jan. 21. The volume of all
futures traded was about 42
percent below the 100-day average.
- Yellen Faces Test Bernanke Failed: Ease Bubbles. Janet Yellen probably will confront a test during her tenure as Federal Reserve
chairman that both of her predecessors flunked: defusing asset bubbles
without doing damage to the economy. The central bank’s easy money
policies already have led to pockets of frothiness in corporate debt and
emerging markets. The danger is that unwinding such speculative
excesses will end up shaking the financial system and hurting growth.
- Deep South Set for Rare Winter Storm Amid U.S. Frigid Front. A rare winter storm is forecast to bring heavy snow
and icing to parts of the Deep South today as temperatures continue to
drop across the U.S. behind an Arctic front sweeping the country.
The storm will extend from the central Gulf Coast to the southern
Mid-Atlantic coast today, the National Weather Service said in a
bulletin at 3:16 a.m. New York time. A wintry mix is possible as far as
southern Los Angeles.
- DuPont(DD) Sales Forecast Trails Estimates as Currency Costs Climb. DuPont
Co. (DD:US), the biggest U.S. chemical maker by market value, forecast
2014 earnings that missed analysts’ estimates as the company predicted
higher costs
from foreign currency exchange. Sales this year will climb 4 percent to about $37 billion,
Wilmington, Delaware-based DuPont said today in a statement,
trailing the $38.1 billion average of 17 estimates compiled by
Bloomberg.
Wall Street Journal:
Fox News:
MarketWatch:
CNBC:
ZeroHedge:
Business Insider:
CNN:
- Ukraine government resigns, parliament scraps anti-protest laws amid crisis. (video)
Ukrainian President Viktor Yanukovych accepted the resignation of
Prime Minister Mykola Azarov and his government Tuesday, amid a
political crisis fired by violent protests on the country's streets.
Azarov and his Cabinet will continue in their roles until a new
government is formed, a notice on the presidential website said.
Yanukovych's announcement
comes only hours after Azarov submitted his resignation and as the
national parliament met in an emergency session aimed at ending the
crisis.
Reuters:
- Corning(GLW) warns of further fall in LCD glass prices. Specialty glass
maker Corning Inc warned that prices of LCD glass would decline further
in the current quarter, raising concerns about growth in its display
business. Corning shares fell as much as 9 percent on Tuesday.
Financial Times:
- China is biggest risk to emerging markets. Tight credit and slowing growth create ripple effect across EMs. Debt markets have now seen 17 straight weeks of outflows and equities 13
weeks, the latter the longest streak in 11 years, according to data
from BofA Merrill Lynch.
Telegraph:
FAZ:
- Germany
Sheds One Third of Solar Jobs in 1 Year. Number of people employed in
solar-cell and solar-module production fell to 4,800 in thr yr through
November, citing data from Germany's Federal Statistics Office. The
industry is suffering from Chinese manufacturer pricing, according to
the report.
The Economic Times:
- RBI's Rate Hike Leaves India Inc Disappointed.
India Inc. today expressed disappointment over the Reserve Bank
increasing the key rate by .25% and hoped that banks would refrain from
hiking lending rates as such a move will scuttle economic recovery. "The
monetary policy statement of the RBI has disappointed the industry.
Growth has been anemic and investments have been hit hard over the last
two years and there are signs of contraction in employment opportunities
across industries," Ficci said in a statement. The
Reserve Bank of India today raised key policy rate by .25 per cent to 8%
in a bid to curb inflation, a move that may translate into higher EMIs
and push up the cost of borrowing for corporates.
The
Reserve Bank today raised key policy rate by 0.25 per cent to 8 per
cent in a bid to curb inflation, a move that may translate into higher
EMIs and push up the cost of borrowing for corporates.
NEW
DELHI: India Inc today expressed disappointment over the Reserve Bank
increasing the key rate by 0.25 per cent and hoped that banks would
refrain from hiking lending rates as such a move will scuttle economic
recovery.
"The monetary policy statement of the RBI has
disappointed the industry. Growth has been anaemic and investments have
been hit hard over the last two years and there are clear signs of
contraction in employment opportunities across industries," Ficci said
in a ..
India's
statistics office is likely to say in two weeks that growth this year
will slump further to an 11-year low, undermining the government's
optimism that it would at least be flat at 5% on the back of a recovery
in the second half.
The advanced estimate for FY14 is set to come in below that level, said an official who didn't want to be named.
The economy expanded 4.6% in the first half and would need to rise
5.4% in the second for growth to come in at 5%, which doesn't lo ..
Gloomy outlook: India's GDP may sink below 5% to an 11-year low
Xinhua:
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -1.34% 2) Oil Service -.32% 3) Computer Services -.27%
Stocks Falling on Unusual Volume:
- CHEF, RCII, AOS, VIP, STX, PII, HDS, SCBT, MX, SRCL, GLW, AAPL, LIVE, FCFS, OCN, DWCH, FEIC, OLN, POST, MONT, MBT, SWKS, TTS, XPO, X and ESI
Stocks With Unusual Put Option Activity:
- 1) SYMC 2) AOL 3) LOW 4) KBH 5) XLF
Stocks With Most Negative News Mentions:
- 1) VIP 2) QCOM 3) MMM 4) JPM 5) CHEF
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +4.12% 2) Airlines +2.28% 3) Gaming +2.09%
Stocks Rising on Unusual Volume:
- TXI, SIMO, MLM, LXK, KLIC, OSK, DHI, MXIM, TROW, SANM, OSK, PDCE, SWFT, CLF, JAZZ, WAT, ANF, VMC, LEN, ISIS, KBH and AAL
Stocks With Unusual Call Option Activity:
- 1) LXK 2) AEO 3) UPL 4) CHRW 5) CPWR
Stocks With Most Positive News Mentions:
- 1) LMT 2) PG 3) AAPL 4) CMCSA 5) PFE
Charts: