Evening Headlines
Bloomberg:
- Ukraine Resumes Effort to Oust Separatists Amid Russian Warnings. Ukraine restarted an offensive
against separatists in eastern cities, prompting Russia to call
the move a crime and warn that it would protect its citizens in
Ukrainian territory. Operations to clear militants from Kramatorsk, Slovyansk
and other cities were under way yesterday, Ukraine’s First
Deputy Prime Minister Vitali Yarema said. Russian Foreign
Minister Sergei Lavrov said yesterday his country would respond
if its “legitimate interests” are “attacked directly.” “Russian citizens being attacked is an attack against the
Russian Federation,” Lavrov said in an interview with the
state-run television broadcaster RT. “If we are attacked, we
would certainly respond.”
- China Stocks Fall to 3-Week Low; Trading Slumps Amid IPO Concern. China’s
stocks fell to a three-week low, with trading volumes in the benchmark
index plunging amid concern new share sales will divert funds.
PetroChina Co. declined before reporting earnings later today, while
China Petroleum & Chemical Corp. retreated 1 percent. Apple Inc.
suppliers Suzhou Anjie Technology Co. (002635) and GoerTek Inc. climbed
at least 0.9 percent after the U.S. company reported a surge in iPhone
sales. The Shanghai Composite Index (SHCOMP) dropped 0.3 percent to 2,060.50 at 9:40 a.m., with trading volumes 36 percent below the
30-day average, according to data compiled by Bloomberg.
- Asian Stocks Fluctuate on U.S. Earnings, Home Sales Data.
Asian stocks swung between gains and losses as investors weighed
better-than-estimated earnings from Apple Inc. and Facebook Inc. and an
unexpected drop in home sales in the world’s largest economy. Toyota
Motor Corp., the world’s largest carmaker, slid 1.6 percent in Tokyo.
Kansai Electric Power Co. sank 3.9 percent after saying it may take a
“long time” to restart its nuclear reactors in Japan. Catcher Technology
Co., which makes casings for iPhones, jumped 5.1 percent and Largan
Precision Co., a
supplier of lenses to Apple, rose 1.5 percent in Taipei.
The MSCI Asia Pacific Index fell 0.2 percent 138.68 as of
11 a.m. in Tokyo, after rising less than 0.1 percent.
- ‘Flash Boys’ Resonates as Survey Finds High-Frequency Concerns. Call
it the “Flash Boys” effect. Michael Lewis’s recent book painted a
picture of a U.S. stock market where insiders including exchanges,
broker-dealers and high-frequency traders are conspiring to cheat
investors. His argument may be resonating. More than two-thirds of
financial industry participants, 70 percent, say the U.S. equity markets
aren’t fair for all, according to a survey conducted by ConvergEx Group
LLC, which
provides brokerage and trading-related services. Just over half,
51 percent, also said high-frequency trading is harmful or very
harmful.
Wall Street Journal:
- Tensions Escalate in Ukraine as Geneva Deal Frays. Russia warned on Wednesday that any attack on its citizens in
Ukraine would be considered an attack on Russia itself, as the Ukrainian
government said it had resumed its "antiterrorist" operation against
pro-Russian militants in the eastern part of the country. The
escalating rhetoric comes amid growing signs that the agreement reached
last week in Geneva between the U.S., European Union, Russia and
Ukraine, laying out steps to reduce tension, was headed for failure. Its
collapse would escalate a race between...
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
Reuters:
- White House considers bank experts for Fed board -sources. The White House is weighing
candidates with community banking backgrounds to fill gaps on
the Federal Reserve's powerful but depleted board, according to
sources familiar with the efforts.
Diana Preston, a lawyer who
recently left a post at the American Bankers Association, which
represents many small banks, is one of those under consideration, two
sources said.
Financial Times:
- Federal Reserve on course for further $10bn taper. The
US Federal Reserve is highly likely to slow its asset purchases by
another $10bn next week as the economy shakes off its winter torpor.
Retail sales, industrial production and payrolls growth were all robust
in recent weeks, adding to evidence of accelerating growth, after a cold
winter led to fears for the economic outlook.
Sankei:
- The Bank of Japan plans to cut growth projection for fiscal 2014,
which is currently at 1.4%, in next economic outlook report on April
30. BOJ may say fiscal 2013 GDP growth was lower than current prediction
of 2.7%. BOJ likely to predict 1.5% GDP growth for fiscal 2015.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 122.50 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 87.5 +1.0 basis point.
- NASDAQ 100 futures +1.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for March are estimated to rise +2.0% versus a +2.2% gain in February.
- Durables Ex Transports for March are estimated to rise +.6% versus a +.2% gain in February.
- Cap Goods Orders Non-Defense Ex Air for March are estimated to rise +1.4% versus a -1.3% decline in February.
- Initial Jobless Claims are estimated to rise to 315K versus 304K the prior week.
- Continuing Claims are estimated to rise to 2745K versus 2739K prior.
11:00 am EST
- The Kansas City Fed Manufacturing Activity Index for April is estimated to fall to 8.0 versus 10.0 in March.
Upcoming Splits
Other Potential Market Movers
- The
Japan CPI, German IFO, $29B 7Y T-Note auction, the weekly EIA natural
gas inventory report, weekly Bloomberg Consumer Comfort Index and the
(SCHW) business update could impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.46 +2.05%
- Euro/Yen Carry Return Index 147.68 -.08%
- Emerging Markets Currency Volatility(VXY) 8.43 +.12%
- S&P 500 Implied Correlation 57.22 +1.63%
- ISE Sentiment Index 136.0 +20.35%
- Total Put/Call .96 +29.73%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.20 +1.28%
- European Financial Sector CDS Index 79.01 +.81%
- Western Europe Sovereign Debt CDS Index 34.30 -2.83%
- Asia Pacific Sovereign Debt CDS Index 87.06 +.70%
- Emerging Market CDS Index 285.11 +3.57%
- China Blended Corporate Spread Index 348.72 -.28%
- 2-Year Swap Spread 9.75 -4.0 basis points
- TED Spread 21.25 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -.75 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 224.0 -7.0 basis points
- China Import Iron Ore Spot $112.20/Metric Tonne -.27%
- Citi US Economic Surprise Index -27.40 -4.5 points
- Citi Emerging Markets Economic Surprise Index -26.80 -1.4 points
- 10-Year TIPS Spread 2.22 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -56 open in Japan
- DAX Futures: Indicating +21 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/medical/biotech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges, then covered some of them
- Market Exposure: 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Gaming -2.24% 2) Homebuilders -1.95% 3) Biotech -1.15%
Stocks Falling on Unusual Volume:
- WB, CREE, STAG, TIS, FBC, UIS, OC, VMI, ISRG, VMW, LECO, IGT, AMGN, ARMH, MTH, FDML, YUM, IRBT, EAT, VRX, CBST, T, UMPQ, MANH, AVY, EMC, MCC, STAG, JNPR and NFLX
Stocks With Unusual Put Option Activity:
- 1) YUM 2) XLI 3) EMC 4) IGT 5) AMGN
Stocks With Most Negative News Mentions:
- 1) KORS 2) MMM 3) EXPE 4) ISRG 5) IRBT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +1.59% 2) Airlines +1.53% 3) Gold & Silver +1.49%
Stocks Rising on Unusual Volume:
- SKX, GWPH, NVGS, SANM, XOOM, SMCI, MDSO, SWKS, ILMN, SPWR, IR, FTI, HA, MAN, RDEN, WWD, CGNX, FTI, DPS and XRX
Stocks With Unusual Call Option Activity:
- 1) TMO 2) OCN 3) SWKS 4) GGP 5) VNDA
Stocks With Most Positive News Mentions:
- 1) PPG 2) CAT 3) SKYW 4) BA 5) DAL
Charts:
Evening Headlines
Bloomberg:
- Ukraine May Resume Push in East as Russian Deal Crumples. Ukraine
considered resuming operations to oust militants from eastern cities as
an agreement with Russia to reduce tensions in the region lay in
tatters. Acting Ukrainian President Oleksandr Turchynov yesterday
called on security forces to move against the separatists after
the discovery of two bodies in the country’s eastern region,
saying that “terrorists” backed by Russia had “crossed the
line.” He spoke hours after meeting in Kiev with U.S. Vice
President Joe Biden, who pledged American support including $50
million in aid.
With the April 17 accord faltering, Ukraine is inching
closer to a renewed push to dislodge militants in defiance of
Russia’s warnings that such a move risks sparking civil war.
- China Defies Obama’s Slow Asia Pivot With Rapid Military Buildup. President Barack Obama’s trip to Asia this week will be dominated by a country he’s not even visiting: China.
Each of the four nations on the president’s itinerary is involved in
territorial disputes with an increasingly assertive China. And years of
military spending gains have boosted the capabilities of the People’s
Liberation Army faster than many defense analysts expected, casting a
shadow over
relations between China and its neighbors and sparking doubts about
long-term prospects for the U.S. presence in the Pacific.
- China’s Stocks Fall After Manufacturing Data Signals Contraction.
China’s stocks fell, led by energy and financial companies, after a
manufacturing gauge signaled a fourth month of contraction. The yuan
touched its lowest level since 2012. China Shenhua Energy Co. paced
declines for coal shares in Hong Kong and Shanghai. China Citic Bank
Corp. lost 1.2 percent in Shanghai. Liquor maker Kweichow Moutai Co.
rose 1.7 percent as a gauge of consumer companies least reliant on
economic growth climbed the most among industry groups. The Shanghai
Composite Index (SHCOMP) fell 0.4 percent to 2,065.37 at 9:54 a.m. The
index has slid for four out of the past five days on concern new initial
public offerings will divert funds. A preliminary Purchasing Managers’ Index from HSBC Holdings Plc and Markit Economics was 48.3 in April, below the level of 50
that’s the dividing line between expansion and contraction.
- Asian Stocks Pare Advance After Chinese, Australian Data.
Asian stocks pared their advance after China’s preliminary
manufacturing data signaled persisting weakness in the world’s
second-largest economy and Australia’s inflation rose less than
expected. Resona Holdings Inc. climbed 2.9 percent after Greenlight
Capital Inc., a hedge fund run by David Einhorn, said it bought shares
in the Japanese lender. Seibu Holdings Inc. jumped 5.1 percent as
Japan’s biggest hotel chain started trading on the Tokyo bourse. China
Overseas Land & Investment Ltd., the largest mainland developer
traded in Hong Kong, sank 4.1 percent, leading declines on the Hang Seng
Index. The MSCI Asia Pacific Index gained 0.1 percent to 138.75 as
of 12:12 p.m. in Tokyo, paring gains of as much as 0.6 percent.
- Copper Drops for First Time in Four Days on China Data. Copper fell for the first time in
four days after a private gauge of Chinese factory production
signaled a fourth month of contraction, curbing demand prospects
in the world’s biggest user of industrial metals. The contract for delivery in three months on the London
Metal Exchange retreated as much as 0.4 percent to $6,646 a
metric ton and was at $6,652 by 10:47 a.m. in Tokyo. The metal
has lost 9.6 percent this year, the worst performer among the
six main metals traded on the LME.
Wall Street Journal:
- U.S. to Move Troops to Allies Near Russia as Tensions Flare in Eastern Ukraine. Pentagon Seeks to Reassure NATO Allies as Kiev Accuses Pro-Russian Forces of Killings. Hundreds of U.S. troops are headed for maneuvers in Eastern Europe
through year's end, the Pentagon announced, new deployments intended to
reassure allies on Russia's borders as violence took a sinister turn
Tuesday in embattled Ukraine.
- In Chinese Property, Smart Players Are Selling. The Tycoon Li Ka-shing Unloads Projects in Shanghai, Guangzhou; Richard Li Sells in Beijing.
For years, Chinese property has been a sure bet for savvy investors
looking to ride the country's economic surge. Now, some of the
best-known names in Chinese investing are cutting back, at least for the
present. Since September, Hong Kong tycoon Li Ka-shing, widely
considered Asia's richest man, has sold office and shopping-mall
projects in the cities of Shanghai and Guangzhou. His son, businessman
Richard Li, sold a prime piece of real estate, a mixed-use complex in
Beijing's Sanlitun shopping district, for US$928 million in early
April.
- Numericable Set to Issue Record Junk Bond. Debt Offering Could Raise $11.6 Billion. A French cable operator is preparing what could be the largest
junk-bond sale in history—a sign of investors' ravenous appetite for
risk in an era of low rates and a mark of the profound shift in bond
financing on a continent that had long borrowed heavily from its banks. Bankers
working on the deal say Numericable Group SA was expected to raise the
equivalent of €8.4 billion ($11.6 billion) from the bond sale Wednesday,
about...
- Keystone Uncensored. A labor leader calls the Administration 'gutless,' 'dirty' and more. Republicans are denouncing President
Obama's
latest delay on the Keystone XL pipeline, six long years after it
was proposed. But for cold political fury they have nothing on
Terry O'Sullivan,
who runs the Laborers' International Union that represents a
half-million construction workers.
Fox News:
- Republicans warn BLM eyeing land grab along Texas-Oklahoma border. Texas officials are raising alarm that the Bureau of Land Management,
on the heels of its dust-up with Nevada rancher Cliven Bundy, might be
eyeing a massive land grab in northern Texas. The under-the-radar issue has caught the attention of Texas Attorney
General Greg Abbott, who fired off a letter on Tuesday to BLM Director
Neil Kornze saying the agency “appears to be threatening” the private
property rights of “hard-working Texans.”
CNBC:
Zero Hedge:
Business Insider:
ABC News:
- Bill Ackman’s Secret $$ Deal for Herbalife Whistleblower. In his year-long campaign against the embattled Herbalife company, Wall
Street hedge fund manager Bill Ackman secretly promised a disgruntled
former company executive as much as $3.6 million over 10 years if he
lost his job after providing information to government investigators and
the media.
Reuters:
- Juniper's(JNPR) revenue rises as telecom clients ramp up networks. Network gear maker Juniper Networks Inc reported a higher-than-expected 10 percent rise in quarterly revenue as U.S. telecom carriers spent more to ramp up
their networks to manage increasing data traffic on smartphones
and tablets. Juniper's shares were little changed in extended trading.
- VMware(VMW) revenue beats estimates, but shares dip on sales delays. Virtualization software maker VMware Inc reported better-than-expected first-quarter revenue and forecast current-quarter revenue largely above analysts'
average estimate as more customers opt for its cloud
infrastructure services. However, the company's shares slipped more than 6 percent in
extended trading after it acknowledged a delay in closing some
of its enterprise license agreements (ELAs) in the first quarter
as customers looked to sign expanded deals.
- Intuitive Surgical(ISRG) cuts outlook for growth in robot procedures. Intuitive Surgical Inc on
Tuesday lowered its forecast for procedure growth for its da
Vinci surgical robots, citing a slowdown in U.S. gynecology
procedures. The medical device maker said it now expects da Vinci
procedure growth in a range of 2 percent to 8 percent, down from
the prior forecast of 9 percent to 12 percent. The lower, wider range reflects uncertainty about the impact
on procedure volumes as hospitals adjust to the implications of
the Affordable Care Act, company officials said on a conference call after the release of first-quarter earnings.
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 123.50 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 86.5 -1.0 basis point.
- NASDAQ 100 futures -.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:45 am EST
- The Preliminary Markit US Manufacturing PMI for April is estimated to rise to 56.0 versus 55.5 in March.
10:00 am EST
- New Home Sales for March are estimated to rise to 450K versus 440K in February.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+2,680,000 barrels versus a +10,013,000 barrel gain the prior week.
Gasoline supplies are estimated to fall by -1,495,000 barrels versus a
-154,000 barrel decline the prior week. Distillate inventories are
estimated to fall by -495,000 barrels versus a -1,278,000 barrel decline
the prior week.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI, BoE Minutes, $35B 5Y T-Note auction and the weekly MBA mortgage applications report also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and financial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Almost Every Sector Gaining
- Volume: Slightly Below Average
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 12.92 -2.49%
- Euro/Yen Carry Return Index 147.80 +.11%
- Emerging Markets Currency Volatility(VXY) 8.40 +1.20%
- S&P 500 Implied Correlation 56.40 -1.23%
- ISE Sentiment Index 119.09 -23.72%
- Total Put/Call .65 -12.1%
Credit Investor Angst:
- North American Investment Grade CDS Index 65.24 -2.31%
- European Financial Sector CDS Index 78.37 -1.98%
- Western Europe Sovereign Debt CDS Index 35.0 -.30%
- Asia Pacific Sovereign Debt CDS Index 86.97 -.46%
- Emerging Market CDS Index 275.31 +.94%
- China Blended Corporate Spread Index 349.71 -.42%
- 2-Year Swap Spread 13.75 -.75 basis point
- TED Spread 20.75 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -1.0 +1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% -1.0 basis point
- Yield Curve 231.0 -2.0 basis point
- China Import Iron Ore Spot $113.56/Metric Tonne -.71%
- Citi US Economic Surprise Index -22.90 +.7 point
- Citi Emerging Markets Economic Surprise Index -25.40 -.6 point
- 10-Year TIPS Spread 2.21 unch.
Overseas Futures:
- Nikkei Futures: Indicating +101 open in Japan
- DAX Futures: Indicating +19 open in Germany
Portfolio:
- Higher: On gains in my tech/medical/biotech/retail sector longs and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 50% Net Long
