Evening Headlines
Bloomberg:
- Mobius Says Emerging Selloff to Deepen. The worst
isn’t over for emerging markets after the benchmark stock index sank to
a five-month low and the nations’ currencies tumbled, said Templeton
Emerging Markets Group’s Mark Mobius. “The negative sentiment is pretty much in place so you can
expect a lot more selling,” Mobius, 77, who oversees more than
$50 billion in developing nations as an executive chairman at
Templeton, said in an interview from Rio de Janeiro today. “We
are looking but actually not buying at this stage. Prices can
come down or take time to stabilize.”
- Asian Stocks Pare Weekly Loss on Jobless Claims, Earnings.
Asian stocks rose, with the regional benchmark index paring its sixth
straight weekly loss, as U.S. jobless claims fell and investors weighed
company earnings. Honda Motor Co., the Japanese carmaker that gets
almost half its revenue in North America, added 2 percent. Sony Corp.
climbed 2.3 percent in Tokyo after the electronics maker announced job
cuts and a reorganization. Aurora Oil & Gas Ltd. surged 56 percent
in Sydney after Baytex Energy Corp., a Canadian producer of heavy crude
oil, agreed to buy the company. GS Engineering & Construction Corp.
slumped 13 percent in Seoul after the contractor said it’s considering a
share sale. The MSCI Asia Pacific Index added 1.1 percent to 132.95 as
of 12:48 p.m. in Tokyo with all 10 industry groups rising. The
measure has pared its weekly drop to 1.4 percent.
- Hedge Funds Lose Less Than Stocks in Month as Dalio Gains. Hedge
funds held up better than stocks in January, falling an average of 0.1
percent as global equities slumped amid a selloff in emerging-market
currencies and signs of weakness in China.
Wall Street Journal:
MarketWatch.com:
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
Washington Examiner:
Reuters:
- IBM(IBM) explores sale of semiconductor business - Financial Times.
- LinkedIn's(LNKD) outlook misses Wall Street estimates. LinkedIn Corp delivered revenue forecasts that fell short of Wall Street's expectations, deflating hopes that the high-flying professional
social network can sustain its growth streak and sending its
stock 8 percent lower.
- Fed balance sheet would shrink quickly without sales -Rosengren. Simply letting purchased bonds mature in the years ahead would shrink the Federal Reserve's swollen balance sheet fairly quickly without the need to actively sell
them, a top U.S. central banker said on Thursday.
"Our intention is to get back to a more normal size balance
sheet," Boston Fed President Eric Rosengren said at a Florida
conference, acknowledging the risk that interest rates are
likely to rise in the future, leading to possible losses on the
balance sheet that is now worth $4 trillion and growing.
- Carlyle to buy Illinois Tool Works(ITW) unit for $3.2 billion.
- U.S. retailers' sales chilled by weather, low consumer confidence. January was a tough end to the most competitive holiday season for U.S. retailers since the 2007-2009 recession. Retail sales figures reported on Thursday showed shoppers continue to pinch pennies, seeking out bargains and paying fewer
visits to stores in a month when consumers typically wrap up
their holiday shopping and redeem gift cards.
- Big bets on Green Mountain ahead of Coke stake raise eyebrows. A
surge in bets that shares of Green Mountain Coffee Roasters would rise
sharply by the end of the week has raised suspicions, coming as it did
just hours before news of a partnership deal with Coca-Cola. GreenMountain said late Wednesday Coca-Cola bought
a 10 percent stake for $1.25 billion and would help launch Green
Mountain's new cold-drink machine, planned for release as soon
as October.
Telegraph:
Evening Recommendations
Stifel Nicolaus:
- (NFLX) raised to Buy, target $475.
Night Trading
- Asian equity indices are +.50% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 144.0 -5.0 basis points.
- Asia Pacific Sovereign CDS Index 111.75 -2.5 basis points.
- NASDAQ 100 futures +.16%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Change in Non-Farm Payrolls for January is estimated to rise to 180K versus 74K in December.
- The Unemployment Rate for January is estimated at 6.7% versus 6.7% in December.
- Average Hourly Earnings for January are estimated to rise +.2% versus a +.1% gain in December.
3:00 pm EST
- Consumer Credit for December is estimated at $12.0B versus $12.32B in November.
Upcoming Splits
Other Potential Market Movers
- The
Canadian unemployment rate, (MU) analyst conference, (GLW) investor
meeting and (STJ) investor meeting could also impact trading today.
BOTTOM LINE: Asian indices are
higher, boosted by technology and industrial shares in the region. I
expect US stocks to open modestly higher and to maintain gains into
the afternoon. 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: Outperforming
Equity Investor Angst:
- Volatility(VIX) 17.34 -13.08%
- Euro/Yen Carry Return Index 144.77 +1.05%
- Emerging Markets Currency Volatility(VXY) 9.52 -1.46%
- S&P 500 Implied Correlation 55.91 -7.89%
- ISE Sentiment Index 87.0 -26.89%
- Total Put/Call .82 -15.45%
Credit Investor Angst:
- North American Investment Grade CDS Index 69.95 -3.93%
- European Financial Sector CDS Index 95.25 -4.15%
- Western Europe Sovereign Debt CDS Index 54.31 -1.25%
- Asia Pacific Sovereign Debt CDS Index 111.95 -2.04%
- Emerging Market CDS Index 327.97 -1.0%
- China Blended Corporate Spread Index 364.68 -1.64%
- 2-Year Swap Spread 13.25 +.5 basis point
- TED Spread 17.0 -1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.0 +3.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .07% +1.0 basis point
- Yield Curve 238.0 +3.0 basis points
- China Import Iron Ore Spot $121.0/Metric Tonne -1.14%
- Citi US Economic Surprise Index 25.50 -4.8 points
- Citi Emerging Markets Economic Surprise Index 9.90 -.3 point
- 10-Year TIPS Spread 2.14 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +340 open in Japan
- DAX Futures: Indicating +10 open in Germany
Portfolio:
- Higher: On gains in my tech/medical/biotech/retail sector longs
- Market Exposure: 75% Net Long
Bloomberg:
- Draghi Signals ECB Ready to Wait Until March for Action. European Central Bank President Mario Draghi said the ECB could take action to counter low inflation as soon as next month, when more data on the euro area’s economy will be available. “We are willing and we are ready to act,” Draghi said in Frankfurt today after the ECB left its benchmark interest rate on hold at a record-low 0.25 percent. “The reason for today’s decision not to act has really to do with the complexity of the situation that I described and the need to get more information.”
- German Factory Orders Unexpectedly Decline on Domestic Demand. German factory orders (GRIORTMM) unexpectedly declined in December on weaker domestic demand, signaling that companies in Europe’s largest economy remain hesitant to invest as surrounding nations struggle to sustain a recovery. Orders, adjusted for seasonal swings and inflation, dropped 0.5 percent from November, when they rose a revised 2.4 percent, the Economy Ministry in Berlin said today. Economists forecast a gain of 0.2 percent, according to the median of 39 estimates in a Bloomberg News survey.
- Ukrainian Opposition Warns Yanukovych as Currency Rattled. Ukraine’s opposition warned President Viktor Yanukovych that the country is running out of time to solve its political crisis after the hryvnia plunged to a five-year low against the dollar this week. Vitali Klitschko, head of the opposition UDAR party, repeated demands yesterday for presidential elections or constitutional change. Acting Prime Minister Serhiy Arbuzov said a failure to compromise was weakening Ukraine. Parliament may meet for a special session Feb. 11 to discuss the issue, Speaker Volodymyr Rybak said today.
- Insurers Slash Specialty Hospitals to Keep Premiums Low. Health insurers under pressure to keep premiums low are eliminating some hospitals from coverage in a cost-cutting strategy that threatens to freeze out centers that provide specialized care, limiting patient options. Left out are hospitals such as Seattle Children’s, excluded from five of seven plans on Washington’s state insurance exchange. The hospital, which has sued the state to be included in more plans, is struggling to get paid for care given to about 125 children since Jan. 1, when Obamacare coverage took effect, said Sandy Melzer, the facility’s strategy officer.
- Jails Enroll Inmates in Obamacare to Pass Hospital Costs to U.S. Being arrested in Chicago for, say, drug possession or assault gets you sent to the Cook County Jail to be fingerprinted, photographed and X-rayed. You’ll also get help applying for health insurance. At least six states and counties from Maryland to Oregon’s Multnomah are getting inmates coverage under Obamacare and its expansion of Medicaid, the federal and state health-care program for the poor. The fledgling movement would shift to the federal government some of the more than $6.5 billion in annual state costs for treating prisoners. Former U.S. Senator Kent Conrad, a Democrat from North Dakota who was on the Senate Finance Committee when the Affordable Care Act passed, said he doesn’t recall discussions about the law’s being used to cover inmates. Conrad said that while he agrees that it’s better to have as many people as possible insured -- including prisoners -- he’s bothered by federal taxpayers picking up the tab for inmate hospital stays. “It starts to look a little like a scheme by the states and local jurisdictions to avoid responsibilities that are really theirs,” Conrad said in a telephone interview.
- Consumer Confidence in U.S. Dropped Last Week to Two-Month Low. Consumer confidence fell last week to the lowest level in more than two months as views on the economy, personal finances and buying climate worsened. The Bloomberg Consumer Comfort Index declined to minus 33.1 in the week ended Feb. 2, the lowest since late November, from minus 31.8 the prior period. The share of Americans saying it’s a good time to shop fell to the lowest since early November.
- GM(GM) Profit Misses Estimates on Europe Restructuring. General Motors Co. (GM) posted fourth-quarter profit that missed analysts’ estimates as the automaker lost money in Asia outside of China, faced higher taxes and restructured in Europe. Profit excluding one-time items was 67 cents a share, Detroit-based GM said today in a statement, trailing the 87-cent average of 14 analysts’ estimates compiled by Bloomberg. That compares with 48 cents a share a year earlier. GM’s miss follows Ford Motor Co. (F)’s fourth-quarter results last week that exceeded estimates with per-share profit of 31 cents, excluding one-time items.
Wall Street Journal:
ZeroHedge:
24/7:
- January Spike in Job Cuts From Retailers and Tech Companies. U.S.-based employers announced plans to cut more than 45,000 jobs last month. That was 47% higher than in the previous month, as well as 12% higher than in January of 2013. The retail sector was hit especially hard. Major national retailers like Best Buy and Target were among those that announced more than 11,000 job cuts last month. That was about 71% more than in the same period of last year.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Telecom -.57% 2) Biotech -.40% 3) Computer Services -.20%
Stocks Falling on Unusual Volume:
- TWTR, MONT, SPR, SWM, SFLY, TYL, OCN, CALD, ASPS, NILE, MDSO, ALR, GEOS, IT, TW, MLI, GIL, CHK, RENT, RRTS, AOL, WAC, PBH, AWH, AIZ, SWI, GPRE, AOL, WNC, SEE, PRGO, FURX, TSO, TMUS, IT, DRIV and P
Stocks With Unusual Put Option Activity:
- 1) AMTD 2) S 3) EXPE 4) OCN 5) VWO
Stocks With Most Negative News Mentions:
- 1) SPR 2) CELG 3) MCHP 4) TUP 5) CERN
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +3.06% 2) Retail +2.66% 3) Homebuilders +2.56%
Stocks Rising on Unusual Volume:
- EVHC, GMCR, SODA, AKAM, RPRX, YELP, SNCR, SBH, PENN, MMS, SALE, AAP, DNKN, USG, VMC, ORLY, PTEN, MMS, SALE, VMC, ADS, ENS, IRBT, FLT, CLF, BKD, SBH, SCSS, LB, DIS, KSS, LVLT, EVHC, ESC and ANN
Stocks With Unusual Call Option Activity:
- 1) AMTD 2) AKAM 3) BG 4) GLUU 5) KSS
Stocks With Most Positive News Mentions:
- 1) KO 2) EXC 3) AOL 4) GMCR 5) YELP
Charts:
Evening Headlines
Bloomberg:
- Abe Eyes Window for Biggest Military-Rule Change Since WWII. Prime
Minister Shinzo Abe, pressed by
China and seeking to strengthen ties with the U.S., is
considering Japan’s biggest change in military engagement rules since
World War II. Barred by its interpretation of a pacifist constitution
from protecting other nations’ troops, Japan needs broader deployment
abilities, according to Abe, 59. Having increased defense spending
two years running and set up a U.S.-style National Security Council, Abe
is now seeking to allow Japan to
come to the aid of its allies, telling parliament yesterday that
“it’s about whether we can exercise this right that every
country has.”
- Hedge Funds Rework Positions in Emerging-Market Drop. Traders
who anticipated a year when
riskier bets would pay off are overhauling their foreign-exchange
positions after an emerging-markets rout led to the biggest
currency-fund losses to start the year since 2004. Hedge funds and
other large speculators shuffled holdings of the dollar, yen, pound,
Mexican peso and four other major currencies by a net 102,115 contracts
in the week ended Jan. 28, according to Commodity Futures Trading
Commission data. That’s the biggest realignment since September, with
updated figures due tomorrow. Currencies from the U.K., Japan and Europe
saw the biggest increase in bets on appreciation, while traders added
wagers on declines for Mexico’s and Australia’s currencies.
- Ford(F) to Cut Third of Australia Workforce in June as Demand Falls. Ford
Motor Co. (F) will cut about 300 jobs at its Australian manufacturing
plants and slash production by a third in June as it prepares to close
its car lines in the nation in 2016. Daily production will fall to
between 80 and 90 cars from 133 cars at present, Wes Sherwood, a
spokesman for the Dearborn, Michigan-based carmaker, said by phone
today.
- Draghi as ECB Master of Suspense Keeps Investors on Edge. Mario
Draghi’s habit of springing surprises means that few can say what he’ll
do when European Central Bank officials decide on monetary policy today.
Inflation at a four-year low and volatile market rates speak for
further action by the Governing Council, even after it cut official
rates to record lows in November. At the same time, signs of economic
improvement and the central bank’s prediction that price gains will
gradually return to target suggest the ECB president may prefer to hold
fire. That’s the call by 62 of the 66 economists surveyed by Bloomberg
News, while 4 predict a cut
in the benchmark rate to 0.1 percent from 0.25 percent.
- Torture Stokes Fear and Resolve as Ukraine Standoff Intensifies. As
demonstrations aimed at ousting Russia-backed President Viktor
Yanukovych have spread, so has the brutality of the response, stiffening
his opponents’ resolve and deepening the standoff. Protest groups say seven
activists have died and 26 have been missing since Jan. 16, when
Yanukovych pushed through a series of anti-protest laws that rekindled
unrest. Officials deny acting illegally and accuse the opposition of
falsifying claims to win public support -- a position dismissed by the
U.S. and the European Union.
- Iraqi Militants Seeking Recruits to Attack U.S., Lawmaker Says. Members of a militant group operating
in Iraq and Syria are recruiting people to attack the U.S.,
according to the lawmaker who heads the House Foreign Affairs
Committee in Washington. The Islamic State of Iraq and the Levant “has reportedly
been actively recruiting individuals capable of traveling to the
U.S. to carry out attacks,” Representative Ed Royce, a
California Republican, said at a hearing of his panel yesterday.
- Jihadist Threat Grows as Egypt Turns to al-Seesi for Security. The
rise of Abdelfatah al-Seesi in Egypt is pouring fuel on an Islamist
militant campaign that threatens his image as the only man who can
restore stability. The defense minister, who overthrew elected leader Mohamed Mursi in July, is increasingly touted as a presidential
candidate himself, winning the blessing of fellow generals last
month. Expectations that he’ll end Egypt’s turmoil are helping
to drive gains on markets. Yet the army-backed government’s
strategy for restoring order risks fueling reprisals by militant
Islamist groups who are expanding their capacity to attack.
- Currency Market Roiled by Trader Exits as Lawsky Probes Banks. The foreign-exchange trading business
was in upheaval across Wall Street as senior executives resigned
and others were fired amid an expanding probe of possible
currency manipulation. Benjamin Lawsky, superintendent of New York’s Department of
Financial Services, asked more than a dozen firms including
Deutsche Bank AG, Goldman Sachs Group Inc. and Citigroup Inc.
for documents on their currency-trading practices, said a person
with knowledge of the matter. Deutsche Bank, the top foreign-exchange trader, fired four dealers after an internal probe,
people with knowledge of the move said. Goldman Sachs lost two
partners while Citigroup said its foreign-exchange chief will
leave in March.
- Bankers Propose Bigger Role for Treasury Managing Dealer System. Wall
Street bankers are asking the U.S. Treasury Department to get more
involved in selecting and monitoring the 21 primary dealers that bid at
government debt auctions and serve as counterparties to the Federal
Reserve. The Treasury should periodically disclose performance evaluation of the dealers, as publicized rankings will help
foster competition among the banks and securities companies,
according to a presentation at a meeting yesterday of the
Treasury Borrowing Advisory Committee, known as TBAC.
Wall Street Journal:
- Obama's IRS 'Confusion'. New evidence undercuts White House claims about IRS motivation. House committees are still digging into the IRS political targeting
scandal, and based on a hearing Wednesday there's more to learn. The day
produced more evidence blowing apart President
Obama's
claims that there was "not even a smidgen of corruption" or
political motivation in the IRS handling of groups applying for
tax-exempt status.
Fox News:
- Calls mount to end ban on oil exports as US production booms. When the Arab oil embargo of 1973 shocked the U.S. into long gas
lines and rationing, Congress approved what was a no-brainer at the time
-- a ban on exporting crude oil produced at home. But today, with domestic oil production booming, some are questioning
whether that ban should stay in place. The new concern is that the U.S.
has more oil than its refineries can handle.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Growing concern with China's behavior at sea - senior U.S. diplomat. The United States
has growing concerns that China's maritime claims in the disputed South
China Sea are an effort to gain creeping control of oceans in the
Asia-Pacific region, a senior U.S. official said on Wednesday.
In congressional testimony,
U.S. Assistant Secretary of State for East Asian and Pacific Affairs
Danny Russel said China's vague territorial claims in the South China
Sea had "created uncertainty, insecurity and instability" among its
neighbors.
- BOJ Iwata: Japan can withstand tax hike pain. Bank of Japan Deputy
Governor Kikuo Iwata said on Thursday the economy can withstand
the pain from a sales tax hike in April as exports and capital
expenditure will gradually pick up and offset the drop in
household spending.
He also said the central bank will not end its ultra-loose
monetary policy unless its 2 percent inflation target is
achieved in a stable manner.
- Kazakh central banker sees many emerging market devaluations in 2014. Kazakhstan's
central bank governor
Kairat Kelimbetov expects to see a lot of emerging market currency
devaluations this year, with the Russian rouble likely to be "close to
collapse again," he said in Geneva on Wednesday. "I think it's kind of a
beginning," he said of a recent emerging markets sell-off. "It's not
only a Russian economy problem but a problem for all the emerging
markets and I think
we will see a lot of devaluation this year. And the situation
with the rouble will be, let's say, close to collapse again."
Rheinische Post:
- German
SPD Wants Counterespionage Against U.S. SPD's interior policy expert
Michael Hartmann says that "who spies on us must expect to become a
target as well," in an interview. Says U.S. cos should be excluded from
future contracts for communication technologies.
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 149.0 -2.0 basis points.
- Asia Pacific Sovereign CDS Index 114.25 -2.5 basis points.
- NASDAQ 100 futures +.28%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Trade Deficit for December is estimated at -$36.0B versus -$34.3B in November.
- Preliminary 4Q Non-Farm Productivity is estimated to rise +2.8% versus a +3.0% gain in 3Q.
- Preliminary 4Q Unit Labor Costs are estimated to fall -.7% versus a -1.4% decline in 3Q.
- Initial Jobless Claims are estimated to fall to 335K versus 348K the prior week.
- Continuing Claims are estimated to rise to 2998K versus 2991K prior.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Rosengren speaking, ECB rate decision, Draghi Press Conference,
Challenger Job Cuts Report for January, weekly EIA natural gas inventory
report, RBC Consumer Outlook Index for February, weekly Bloomberg
Consumer Comfort Index and the (FIO) analyst day could also impact
trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 75% net long heading into the day.
