Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 14.35 -8.25%
- Euro/Yen Carry Return Index 147.51 -.21%
- Emerging Markets Currency Volatility(VXY) 8.85 -1.23%
- S&P 500 Implied Correlation 52.98 -4.18%
- ISE Sentiment Index 162.0 +74.19%
- Total Put/Call .71 -14.46%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.41 -2.63%
- European Financial Sector CDS Index 88.12 -3.79%
- Western Europe Sovereign Debt CDS Index 48.35 -2.44%
- Asia Pacific Sovereign Debt CDS Index 98.69 +.52%
- Emerging Market CDS Index 315.82 -2.08%
- China Blended Corporate Spread Index 381.76 -.67%
- 2-Year Swap Spread 13.5 -.25 basis point
- TED Spread 10.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -3.25 +.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .05% unch.
- China Import Iron Ore Spot $110.50/Metric Tonne +.82%
- Citi US Economic Surprise Index -33.50 +2.3 points
- Citi Emerging Markets Economic Surprise Index -6.10 +2.6 points
- 10-Year TIPS Spread 2.19 unch.
Overseas Futures:
- Nikkei Futures: Indicating +44 open in Japan
- DAX Futures: Indicating +24 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short, then added them back
- Market Exposure: 50% Net Long
Bloomberg:
- Ukraine Says Conflict With Russia Turned Military From Political. Ukraine’s
government said its conflict with Russia has entered a military phase
as clashes in the breakaway Crimea region intensified, killing at least
one Ukrainian serviceman. The country is seeking to set up a
commission including the defense ministers of Russia, the U.S. and the
U.K. to avert
further escalation, Prime Minister Arseniy Yatsenyuk told
reporters in Kiev. A soldier was killed when unidentified masked
gunmen stormed a military installation in Crimea, Vladyslav
Seleznyov, a spokesman for Ukraine’s defense ministry in the
region, said by phone. Tensions are increasing after Russian President
Vladimir Putin flouted Western sanctions and signed a treaty annexing
Crimea into the Russian Federation. The Black Sea peninsula in a
disputed March 16 referendum voted to leave Ukraine and join Russia. Russia has 25,000 troops in Crimea, which are blocking 38 Ukrainian units in the region, Serhiy Hayduk, the head of the
Ukrainian Navy, said via video link. Hayduk will speak with a
Russian deputy defense minister to avert escalation, he said.
- Russian Troop Buildup Seen at Ukraine Border After Crimea. Russia has increased its military presence near Ukraine’s
border as it tries to repeat the events that led up to Crimea’s
incorporation into Russia in the east of the country, the governor of
the Kharkiv region said. Russian forces have been boosted in the
last five days, massing along roadways about 15 kilometers (9 miles)
from the border, said Ihor Baluta, appointed by the interim government
in Kiev after the ouster of Viktor Yanukovych last month. “They
are concentrated along the highways, which implies they want to move
quickly into our territory,” Baluta said in an interview in Ukraine’s
second biggest city today. “Russia is trying to create the situation
unfolding now in the south here in eastern regions.”
- Putin Says Russia Doesn’t Want Ukraine Split After Crimea.
Western leaders condemned Russian President Vladimir Putin’s push to
annex Crimea and promised further sanctions as early as this week,
ratcheting up pressure in the biggest diplomatic crisis since the Cold
War. British Prime Minister David Cameron called Putin’s seizure of
the Black Sea peninsula from Ukraine a breach of international law that
sent “a chilling message across the continent of Europe.” He vowed to
push European leaders to agree to further measures against Russia when
they meet March 20. U.S. Vice President Joe Biden, in Poland on a trip
to meet regional allies, predicted “additional
sanctions” over what he called “a brazen military incursion.”
- Ruble Drops With Bonds as Putin Backs Crimea Accession Bid.
The ruble and government bonds fell after President Vladimir Putin said
he supported a request from Ukraine’s breakaway Crimea region to join
Russia, stoking concern harsher western sanctions may follow. Stocks
gained.The ruble weakened 0.4 percent to 42.8996 against Bank
Rossii’s target basket of dollars and euros by 2:30 p.m. in Moscow. The
yield on government bonds due February 2027 rose eight basis points, or
0.08
percentage point, to 9.44 percent.
- Bearish Bets on Japan Stocks Jump to Highest in 5 Years. Bearish bets on Japanese stocks
surged to the highest in at least five years, signaling
investors predict further declines for a market that’s already
the developed world’s worst performer this year. Short sales
comprised 36 percent of total trading on the Tokyo Stock Exchange
yesterday, the highest since the data series began in October 2008.
Paper manufacturers were the most-shorted industry, followed by banks
and brokerages, the exchange data show.
- German ZEW Investor Confidence Falls to Lowest Since August.
German investor confidence fell to the lowest since
August as political uncertainty in Ukraine threatens to weigh on a
recovery in Europe’s largest economy that may be nearing its peak. The
ZEW Center for European Economic Research in Mannheim said its index of
investor and analyst expectations, which aims to predict economic
developments
six months in advance, slid to 46.6 from 55.7 in February. That’s the
third monthly decline. Economists forecast a decline to 52, according to
the median of 41 estimates in a Bloomberg News survey. The gauge
reached a seven-year high of 62 in December.
- IMF Growth Forecasts Seen Too Optimistic in Large-Loan Countries. The International Monetary Fund tends to be too upbeat when projecting the economic growth of countries that receive large loans, an internal audit found. In a report that looks at IMF loan programs between 2002
and 2011, the auditor found that “the forecast bias at program
inception was optimistic and significant” for nations that
could borrow more than their size at the fund would allow under
the “exceptional access” rule.
- European Stocks Advance, Extending Rally; Kuoni Increases.
European stocks rose, extending their biggest gain in two weeks, after
Russian President Vladimir Putin said he isn’t seeking to split up
Ukraine. Kuoni Reisen Holding AG (KUNN) climbed 8.2 percent after
Switzerland’s biggest travel company posted 2013 profit that exceeded
analysts’ estimates. SBM Offshore NV rallied 6.3 percent. Cairn Energy
Plc fell to its lowest price in more than 10 years after saying it is
suspending a buyback program. Scania
AB declined 2.1 percent after a board committee recommended
rejecting Volkswagen AG’s takeover offer. The Stoxx Europe 600 Index gained 0.6 percent to 327.93 at the close in London, after earlier falling as much as 0.5
percent.
- High-Speed Trading Faces New York Probe Into Fairness. New York’s top law enforcer has opened a broad investigation into
whether U.S. stock exchanges and alternative venues provide
high-frequency traders with improper advantages. Attorney
General Eric Schneiderman said today that he’s examining the sale of
products and services that offer faster access to data and richer
information on trades than what’s typically available to the public.
Wall Street banks and rapid-fire trading firms pay thousands of dollars a
month for these services from firms including Nasdaq OMX Group Inc.
(NDAQ) and IntercontinentalExchange Group Inc.’s New York Stock
Exchange.
Wall Street Journal:
- Russia's Putin Signs Treaty to Annex Crimea. President Says Ukraine Region Is Vital to Russia's Security. In
an otherwise defiant speech to both houses of parliament and top
officials, Mr. Putin dismissed sanctions and threats of other
consequences from Europe and the U.S., saying the West had "crossed the
line" by fomenting what he called a putsch in Kiev earlier this year.
- CFTC Expected to Delay Planned Overseas Derivatives Trading Restrictions. New Rules on Derivatives Trading Set to Go Into Effect March 24.
The Commodity Futures Trading Commission is expected to delay planned
overseas derivatives trading restrictions relating to a continuing
effort to harmonize domestic and international rules. The CFTC, the main
U.S. derivatives regulator, is likely to put off restrictions on
derivatives trading in Europe set to go into effect March 24, according
to a person familiar with the matter. It was unclear how long the delay
would last.
MarketWatch:
ZeroHedge:
Business Insider:
- This Is The Top, Right? Borrowing money against your home to buy stocks at multi-year highs? What could go wrong?
Style Underperformer:
Sector Underperformers:
- 1) Gaming -.22% 2) Retail -.14% 3) Papers -.11%
Stocks Falling on Unusual Volume:
- CHH, HART, XLRN, CHKR, DSW, SFLY, MTSI, BIS, WRLD, ICLD, NDAQ, KNDI,
STAA, GME, SFM, FPRX, HMC, IIVI, SPN, DLR, SINA, UBSH, FMC, NVGS, DSW and STAA
Stocks With Unusual Put Option Activity:
- 1) CWH 2) NKE 3) MSFT 4) XLK 5) OIH
Stocks With Most Negative News Mentions:
- 1) GM 2) TSLA 3) CVS 4) INTL 5) UTIW
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +2.49% 2) Biotech +2.12% 3) Software +1.79%
Stocks Rising on Unusual Volume:
- FF, MXWL, VNET, PVA, YNDX, RMBS, FDS, GTAT, ZU, LOCK and AR
Stocks With Unusual Call Option Activity:
- 1) CDE 2) VIAB 3) WLP 4) RMBS 5) IDRA
Stocks With Most Positive News Mentions:
- 1) CME 2) HPQ 3) JCI 4) T 5) ORCL
Charts:
Evening Headlines
Bloomberg:
- Putin Moves Toward Claiming Crimea as U.S. Joins EU on Sanctions. Russian President Vladimir Putin
took another step toward annexing Crimea, defying sanctions
imposed by the U.S. and European Union in the worst standoff
with Russia since the end of the Cold War. Acting in concert, the U.S. and EU unveiled penalties
yesterday on Russian and Ukrainian officials linked to efforts
to wrest Crimea from Ukraine. Putin responded by recognizing the
breakaway Black Sea region as a sovereign state while Western
leaders warned that Russia would face added sanctions, including
possibly on energy assets, if it moved deeper into Ukraine.
- Evergrande Bonds Decline Amid China Housing Bankruptcy. Stocks and bonds issued by Chinese
real estate companies slumped after the collapse of a private
developer added to concern that defaults are starting to mount
as the economy slows and the government reins in lending. Prices on the dollar bonds sold by Evergrande Real Estate
Group Ltd., the nation’s fourth largest developer by market
value, fell 0.5 cent on the dollar yesterday, sending yields to the highest since August. Prices
on Kaisa Group Holdings Ltd. (1638)’s bonds maturing in 2018 dropped to
a seven-month low. Shares of E-House China Holdings Ltd. (EJ), the
online real estate services provider, slid 2.6 percent while SouFun
Holdings Ltd. (SFUN) retreated
for a seventh day.
- China Home-Price Growth Slows in Big Cities on Tight Credit. Chinese new-home price growth
slowed last month, led by the four cities the government defines
as first tier, amid tighter credit to rein in excessive
borrowing and individual city measures to curb property prices.
Prices in Beijing and the southern business hub of Shenzhen
each rose 0.2 percent in February from a month earlier, the National
Bureau of Statistics said today. That was the slowest pace since October
2012. They added 0.4 percent in Shanghai, the smallest increase since
November 2012, and gained 0.5 percent in Guangzhou. Prices climbed in 57
of the 70 cities tracked by the
government. That compares with 62 in January.
- Japan Analysts Split on Fiscal Crisis Time as Tax Looms: Economy. Economists
are split over how long Japan’s government has to rein in the world’s
biggest debt burden, a Bloomberg News survey shows, adding to a debate
on whether the government should keep ratcheting up a sales tax. Eleven of 34 analysts said the government has four years or less to put fiscal policy on a sustainable path and avoid a
crisis, while seven said it has over 10 years. BNP Paribas SA
and Credit Suisse Group AG were among five saying it’s too late
to avert one. UBS AG says chances of a fiscal crisis are remote.
- Russia Sounds Alarm on Economic Crisis as West Imposes Sanctions. “The situation in the economy bears clear signs of a
crisis,” Deputy Economy Minister Sergei Belyakov said in Moscow
yesterday. The cabinet needs to refrain from raising the fiscal
burden on companies, which would be the “wrong approach,” he
said. “Taking money from companies and asking them afterward to
modernize production is illogical and strange.”
- Asian Stocks Rise From Five-Week Low on U.S. Factory Data. Asian stocks rose, with the
regional gauge rebounding from a five-week low, as data showing
an improvement in U.S. factory output boosted optimism in the
world’s biggest economy. The MSCI Asia Pacific Index climbed 0.4 percent to 134.65 as of 9:02 a.m. in Tokyo. The gauge slumped 3.5 percent last week as data on Chinese industrial production and retail sales
disappointed investors.
- Milk Costs Most Ever on Surging Demand for U.S. Dairy Exports.
Milk futures in Chicago jumped to an all-time high as surging U.S.
dairy exports depleted supplies available for domestic consumers. Shippers
sold 162,999 metric tons of milk powder, cheese, butterfat and whey in
January, up 19 percent from a year earlier, according to the latest data
from the U.S. Dairy Export
Council. Almost 15 percent of milk production went to exported
goods, up from 12 percent a year earlier, the group said. Cheese
shipments climbed 46 percent.
- Sony Corp. Said Cutting Jobs at Entertainment Division.
Sony Corp. (6758) began a new round of job cuts at its entertainment
division, said a person with knowledge of the situation, part of Chief
Executive Officer Kazuo Hirai’s effort to improve profitability at the
unit. The reductions are taking place at the Culver City,
California-based film and television studio, as well as other
locations worldwide, said the person, who asked not to be named
because the details aren’t yet public.
Wall Street Journal:
- Chinese Companies Caught in Yuan Riptide. Bets by Firms and Individuals on a Rise in Currency Face Losses as Country Changes Tack. China's decision to squeeze speculators out of its currency is causing pain for local companies and individual investors. The
yuan fell on Monday to its lowest level in 10 months against the dollar
after the government over the weekend doubled the currency's daily
trading range. The decision, foreshadowed by months of hints by Chinese
officials, followed a weekslong campaign by the country's central bank
to weaken the yuan. China is attempting
to reduce the amount of money flowing into the country from foreign
investors looking to profit on a rise in the yuan. The government sees
this cash as inflating asset prices and making the economy more
vulnerable to financial shocks.
- Taper Talk Slammed Strong Emerging Nations Most. New research argues emerging-market nations hit hardest in the run up to the Federal Reserve’s
decision to cut back its bond buying were those whose financial houses
were in the best order, relatively speaking—a finding contrary to much
recent conventional wisdom.
- Obama's Unserious Sanctions. The U.S. and Europe help lift the Russian stock market.
President
Obama and the European Union announced their sanctions
response to Vladimir Putin's rolling conquest of Crimea on Monday, and
the most accurate assessment came from financial markets. Moscow's
stock exchange, which has been battered for two weeks in fear of Western
sanctions, rose 3.7%. Congratulations, Mr. President. You gave the
Kremlin a sanctions relief rally. Mr. Obama had promised
"consequences" if Mr. Putin followed through with the Crimean
referendum, so we doubt even the Russian President thought the West's
actions would be this weak. Russian opposition leader
Alexei Navalny
tweeted from Moscow that the sanctions list was "of course,
funny." He added that "Obama only delighted all our crooks and
encouraged them." That turned out to be literally true when one of the Russians on Mr. Obama's list, Deputy Prime Minister
Dmitry Rogozin,
tweeted, "It seems to me that some kind of joker wrote the U.S. president's order :)" LOL.
Fox News:
- Ukraine officials pleading with US to provide military aid, lawmaker says. Ukrainian officials pleaded with visiting U.S. lawmakers this past
weekend to provide military aid, claiming their ousted president
intentionally gutted the nation's defenses so it would be vulnerable to a
Russian takeover, one of those U.S. lawmakers told Fox News. "They wanted arms," the lawmaker said, "even recognizing that it
could be cited by Putin as an excuse, a provocation for further military
action by him. They said Putin's goal has never been Crimea; his goal
is Kiev."
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
Telegraph:
Evening Recommendations
Cowen:
- Rated (CBI) Outperform, target $98.
- Rated (FLR) Outperform, target $90.
Night Trading
- Asian equity indices are +.25% to +.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 128.0 -7.5 basis points.
- Asia Pacific Sovereign CDS Index 97.5 -4.25 basis points.
- NASDAQ 100 futures +.13%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Consumer Price Index for February is estimated to rise +.1% versus a +.1% gain in January.
- The CPI Ex Food & Energy for February is estimated to rise +.1% versus a +.1% gain in January.
- Housing Starts for February are estimated to rise to 910K versus 880K in January.
- Building Permits for February are estimated to rise to 960K versus 937K in January.
9:00 am EST
- Net Long-Term TIC Flows for January are estimated at $40.0B versus -$45.9B in December.
Upcoming Splits
Other Potential Market Movers
- The German ZEW Index, weekly retail sales reports and the (SNCR) investor meeting 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.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 15.69 -11.95%
- Euro/Yen Carry Return Index 147.73 +.42%
- Emerging Markets Currency Volatility(VXY) 8.96 -1.32%
- S&P 500 Implied Correlation 55.07 -6.69%
- ISE Sentiment Index 90.0 +12.50%
- Total Put/Call .83 +7.79%
Credit Investor Angst:
- North American Investment Grade CDS Index 65.09 -3.79%
- European Financial Sector CDS Index 90.20 -4.26%
- Western Europe Sovereign Debt CDS Index 49.56 -.90%
- Asia Pacific Sovereign Debt CDS Index 98.69 -3.08%
- Emerging Market CDS Index 321.72 -2.09%
- China Blended Corporate Spread Index 379.16 unch.
- 2-Year Swap Spread 13.75 -.5 basis point
- TED Spread 18.75 -.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -4.0 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .05% +1.0 basis point
- Yield Curve 233.0 +3.0 basis points
- China Import Iron Ore Spot $109.60/Metric Tonne -.45%
- Citi US Economic Surprise Index -35.80 -3.1 points
- Citi Emerging Markets Economic Surprise Index -8.70 -.7 point
- 10-Year TIPS Spread 2.19 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +203 open in Japan
- DAX Futures: Indicating +11 open in Germany
Portfolio:
- Slightly Lower: On losses in my index hedges and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
