Thursday, March 06, 2014

Stocks Modestly Higher into Final Hour on Yen Weakness, Less Emerging Markets/Eurozone Debt Angst, Short-Covering, Transport/Energy Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: About Even
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 14.12 +1.66%
  • Euro/Yen Carry Return Index 148.95 +1.60%
  • Emerging Markets Currency Volatility(VXY) 8.72 +.81%
  • S&P 500 Implied Correlation 54.22 +1.65%
  • ISE Sentiment Index 182.0 +29.08%
  • Total Put/Call .90 +18.42%
  • NYSE Arms .68 -13.39% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 62.25 -.57%
  • European Financial Sector CDS Index 85.75 -1.44%
  • Western Europe Sovereign Debt CDS Index 49.68 -2.59%
  • Asia Pacific Sovereign Debt CDS Index 94.05 -3.02%
  • Emerging Market CDS Index 295.91 -1.96%
  • China Blended Corporate Spread Index 359.15 -.53%
  • 2-Year Swap Spread 13.5 +.25 basis point
  • TED Spread 19.0 +.75 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -3.25 +3.0 basis points
Economic Gauges:
  • 3-Month T-Bill Yield .05% unch.
  • Yield Curve 239.0 +3.0 basis points
  • China Import Iron Ore Spot $116.90/Metric Tonne +.17%
  • Citi US Economic Surprise Index -28.0 -.1 point
  • Citi Emerging Markets Economic Surprise Index 12.0 unch.
  • 10-Year TIPS Spread 2.22 +3.0 basis points
Overseas Futures:
  • Nikkei Futures: Indicating +158 open in Japan
  • DAX Futures: Indicating -18 open in Germany
Portfolio: 
  • Slightly Lower: On losses in my biotech/retail sector longs and emerging markets shorts
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long

Today's Headlines

Bloomberg:
  • Crimea Makes Move to Join Russia as EU Clashes on Sanctions. Crimean lawmakers called a March 16 referendum to return Ukraine’s Black Sea peninsula to its former Soviet-era master as European Union leaders quarreled over how to tame Russia for its military actions there. As the region’s leaders pushed for a split away from Ukraine, The U.S. banned visas for officials it said were complicit in violating the sovereignty of the ex-Soviet state of 45 million. A summit in Brussels started with eastern EU states calling for a tough line on the Kremlin and their western counterparts offering Russia more time to pull back its forces in Crimea before imposing sanctions. “This so-called referendum has no legal grounds,” Ukrainian Prime Minister Arseniy Yatsenyuk said in Brussels after meeting EU leaders. “We urge the Russian government not to support those who claim separatism in Ukraine. Crimea was, is, and will be an integral part of Ukraine.”
  • Republicans Seek Quick Congress Action on Russia Sanctions. Citing what they call a pattern of foreign policy failures by Obama, Republicans yesterday said it was imperative for Congress to respond quickly to persuade Russian President Vladimir Putin to loosen his grip on the Crimea region. Putin is “counting on the United States to sit back and watch him do and take whatever he wants,” House Speaker John Boehner, an Ohio Republican, said today.
  • EU Halts Russian Trade, Visa Talks With Threat of More Curbs. European Union governments halted trade and visa negotiations with Russia and prepared sanctions against selected Russian officials to protest the Kremlin’s assertion of control over Ukraine’s southern Crimea region. EU leaders sent the diplomatic signals at a summit in Brussels today that pitted western European countries keen to offer Russia more time to pull back its forces before imposing sanctions against eastern countries demanding retribution now. 
  • Draghi Says Deflation Danger Should Abate as Economy Revives. European Central Bank President Mario Draghi signaled that deflation risks in the euro region are easing for now after new forecasts showed that inflation will approach their target by the end of 2016. “The news that has come out since the last monetary policy meeting are by and large on the positive side,” he told reporters in Frankfurt today after the central bank kept its main interest rate at 0.25 percent. He also indicated that money markets are under control at the moment, lessening the need for emergency liquidity measures. 
  • China Bond Sales Axed as Looming Default Boosts Junk Yields. Four companies pulled domestic bond sales and yields on speculative-grade debt jumped the most since November after Shanghai Chaori Energy Science & Technology Co. warned of what would be China’s first onshore default. The yield on five-year AA- notes rose eight basis points to 7.77 percent yesterday, the biggest increase since Nov. 15, ChinaBond data show. The spread over similar-maturity government bonds widened seven basis points to 356 basis points. Ratings of AA- or below are equivalent to non-investment grades globally, according to Haitong Securities Co., the nation’s second-biggest brokerage.
  • Brazil Signals Additional Tightening on Persistent Inflation. Brazil’s central bank signaled today it will continue tightening monetary policy as above-target inflation remains persistent. Swap rates rose. Policy makers led by bank President Alexandre Tombini voted unanimously on Feb. 26 to slow the pace of rate increases, raising the benchmark Selic rate to 10.75 percent from 10.5 percent after six straight half-point increases. The central bank’s monetary policy will help offset inflationary pressure from a currency depreciation, officials said in the minutes of their Feb. 25-26 meeting published online today
  • Gold Futures Advance on Outlook for U.S. Rates, Europe Inflation. Gold futures rose for the second straight day amid forecasts that U.S. borrowing costs will hold at a record low and European inflation will pick up gradually. Through yesterday, gold climbed 11 percent this year on demand for a haven amid turmoil in Ukraine and concern that the U.S. is faltering.
  • World Food Prices Jump Most in 19 Months as Oils and Grains Rise. World food prices rose 2.6 percent in February, the biggest jump in 19 months, as prices for cooking oils, grains, dairy and sugar all rose, the United Nations’ Food & Agriculture Organization said. An index of 55 food items rose to 208.1 points from a restated 202.9 in January, when it dropped to the lowest level since June 2012, the Rome-based FAO wrote in an online report today. The gauge is still down 2.1 percent from a year earlier.
  • Banks Enriched by Junk Resist U.S. Regulator Standards. More than five months ago, the Federal Reserve and Office of the Comptroller of the Currency told some of the biggest banks to improve underwriting standards for non-investment-grade loans. The market is showing few signs of tightening as lenders chase lucrative fees. Banks are arranging junk-rated deals that leave companies with debt levels exceeding guidelines set by regulators. Bank supervisors are insisting on minimum standards as they seek to avoid a repeat of the losses that occurred during the credit crisis, which sent the global speculative-grade default rate to more than 13 percent in 2009, the highest since the Great Depression. The persistence of deals with questionable terms shows that, so far, regulators are having trouble deterring excessive risk-taking simply by asking. “Jawboning rarely works if there’s money to be made,” said Mark Calabria, director of financial regulation studies at the Washington-based Cato Institute, a research group that espouses limited government. “History doesn’t repeat itself but sometimes it rhymes -- I certainly have those concerns.”
Wall Street Journal:    
Fox News:
  • Fox News poll: Obama's approval hits new low. For the first time in a Fox News poll, fewer than four voters in ten -- 38 percent -- approve of President Obama’s job performance. Fifty-four percent disapprove. Before now Obama’s worst job rating was 40-55 percent in November 2013. Last month 42 percent approved and 53 percent disapproved (February 2014).
MarketWatch:
ZeroHedge: 
ValueWalk:
Business Insider: 
CNN:
Reuters:
  • European stocks lose steam as ECB sits on its hands. European stock markets gave up their gains on Thursday after the European Central Bank chose not to take action to inject more liquidity into the region's financial system, disappointing some investors.
  • Patience wearing thin with French reform results. France is facing pressure to deliver on long-promised, deep budget savings in the next couple of weeks to keep the increasingly strained faith of its EU partners, bond markets and ratings agencies.

Bear Radar

Style Underperformer:
  • Small-Cap Growth -.12%
Sector Underperformers:
  • 1) Oil Tankers -1.60% 2) Biotech -1.65% 3) Disk Drives -1.41%
Stocks Falling on Unusual Volume:
  • SUI, PLCE, SPLS, TCRD, CPA, RGEN, GEVA, VGR, MXWL, RNET, MYRG, COST, AVAV, CIEN, OSIR, WX, ABTL, SJI, ZU, UIL, HCI, BITA, SPTN, ARWR, VRX, P, ZU, AUXL and PRFT
Stocks With Unusual Put Option Activity:
  • 1) BYD 2) SPLS 3) JOSB 4) JOY 5) SLB
Stocks With Most Negative News Mentions:
  • 1) PLCE 2) MBI 3) CLR 4) AUXL 5) LOW
Charts:

Bull Radar

Style Outperformer:
  • Large-Cap Value +.35%
Sector Outperformers:
  • 1) Ag +1.15% 2) Airlines +1.06% 3) Gold & Silver +.98%
Stocks Rising on Unusual Volume:
  • RNG, SGMO, DANG, ORAN, SSI, BJRI, QUNR, NM, AXLL, SINA, HA, AGIO, KEYW, WAC, PBF, IRBT, DWA, NTI, JOY, VLO and SWC
Stocks With Unusual Call Option Activity:
  • 1) MDLZ 2) SPLS 3) PPHM 4) HA 5) SGMO
Stocks With Most Positive News Mentions:
  • 1) YHOO 2) UTX 3) FCEL 4) CIEN 5) IGT
Charts:

Wednesday, March 05, 2014


Night Trading
  • Asian equity indices are unch. to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 130.0 +1.0 basis point.
  • Asia Pacific Sovereign CDS Index 97.0 -2.5 basis points.
  • FTSE-100 futures +.30%.
  • S&P 500 futures +.14%.
  • NASDAQ 100 futures  +.11%.
Morning Preview Links

Earnings of Note

Company/Estimate
  • (SPLS)/.39
  • (COST)/1.17
  • (KR)/.72
  • (JOY)/.65
  • (CIEN)/.06
  • (SSI)/.99
  • (COO)/1.46
  • (FNSR)/.44
  • (HRB)/-.11
  • (PF)/.58
  • (TFM)/.42
  • (PLCE)/.95 
  • (KFY)/.34
Economic Releases
8:30 am EST
  • Final 4Q Non-Farm Productivity is estimated to rise +2.2% versus a prior estimate of a +3.2% gain.
  • Final 4Q Unit Labor Costs are estimated to fall -.5% versus a prior estimate of a -1.6% decline.
  • Initial Jobless Claims are estimated at 336K versus 348K the prior week.
  • Continuing Claims are estimated at 2970K versus 2964K the prior week.
10:00 am EST
  • Factory Orders  for January are estimated to fall -.5% versus a -1.5% decline in December.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Fed's Dudley speaking, Fed's Plosser speaking, Fed's Lockhart speaking, ECB rate decision, BoE rate decision, Draghi press conference, 4Q Household Net Worth Change, RBC Consumer Outlook Index for March, Challenger Job Cuts report for February, BofA Refining Conference, weekly Bloomberg Consumer Comfort Index, weekly EIA natural gas inventory report, (HUN) investor day, (COL) investor conference, (A) analyst meeting and the (TRLA) 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 weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Stocks Slightly Lower into Final Hour on Russia/Ukraine Tensions, Technical Selling, Profit-Taking, Homebuilding/REIT Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 14.19 +.64%
  • Euro/Yen Carry Return Index 146.55 +.02%
  • Emerging Markets Currency Volatility(VXY) 8.61 -2.93%
  • S&P 500 Implied Correlation 53.73 +.84%
  • ISE Sentiment Index 139.0 +14.88%
  • Total Put/Call .76 -5.0%
  • NYSE Arms .77 +17.32% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 62.56 +.12%
  • European Financial Sector CDS Index 87.10 -1.52%
  • Western Europe Sovereign Debt CDS Index 51.0 -1.30%
  • Asia Pacific Sovereign Debt CDS Index 96.67 -2.95%
  • Emerging Market CDS Index 299.53 -1.02%
  • China Blended Corporate Spread Index 361.06 -1.56%
  • 2-Year Swap Spread 13.25 -.25 basis point
  • TED Spread 18.25 -.75 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -6.25 -.5 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .05% unch.
  • Yield Curve 236.0 unch.
  • China Import Iron Ore Spot $116.80/Metric Tonne -.76%
  • Citi US Economic Surprise Index -16.70 +2.0 points
  • Citi Emerging Markets Economic Surprise Index 12.0 -.4 point
  • 10-Year TIPS Spread 2.19 unch.
Overseas Futures:
  • Nikkei Futures: Indicating +1 open in Japan
  • DAX Futures: Indicating -2 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my tech sector longs, index hedges and emerging markets shorts
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long