Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Most Sectors Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 13.64 -2.36%
- Euro/Yen Carry Return Index 147.80 -.22%
- Emerging Markets Currency Volatility(VXY) 8.21 -1.20%
- S&P 500 Implied Correlation 54.76 -1.93%
- ISE Sentiment Index 144.0 +69.41%
- Total Put/Call .91 +1.11%
Credit Investor Angst:
- North American Investment Grade CDS Index 65.44 -.81%
- European Financial Sector CDS Index 80.76 -1.95%
- Western Europe Sovereign Debt CDS Index 35.30 +.31%
- Asia Pacific Sovereign Debt CDS Index 88.98 +.11%
- Emerging Market CDS Index 279.28 -2.50%
- China Blended Corporate Spread Index 358.31 +.96%
- 2-Year Swap Spread 11.0 -.5 basis point
- TED Spread 21.50 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -5.25 -3.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 225.0 -1.0 basis point
- China Import Iron Ore Spot $108.30/Metric Tonne -.28%
- Citi US Economic Surprise Index -21.0 +.4 point
- Citi Emerging Markets Economic Surprise Index -26.30 -.2 point
- 10-Year TIPS Spread 2.17 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +202 open in Japan
- DAX Futures: Indicating +21 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- EU Joins U.S. With New Sanctions on Russia Over Ukraine. The
European Union widened sanctions against Russia for its actions in
Ukraine, following similar steps yesterday by the U.S., which called
separatist violence in the country’s east “terrorism, pure and simple.”
The EU added Russian Deputy Premier Dmitry Kozak to a list of people
facing travel bans and asset freezes along with others including
pro-Russian separatist leaders, according to a statement today in the
EU’s Official Journal. The U.S. targeted seven people, including Kozak
and Igor Sechin, head of oil giant OAO Rosneft (ROSN), and 17 companies
yesterday linked to allies of President Vladimir Putin, such as
InvestCapitalBank.
- China Test Shows Bad Loan Surge Would Hurt Banks’ Capital.
China’s systemically important banks may see their capital adequacy
ratio fall to 10.5 percent in the event bad loans surge fivefold,
according to a stress test by the nation’s central bank. The average
capital adequacy ratio of the 17 banks, which account for 61 percent of
China’s banking assets, may fall to 10.5 percent from the end-2013 level
of 11.98 percent should nonperforming loans increase 400 percent in the
worst-case scenario, the People’s Bank of China said in its annual financial stability report yesterday.
- European Stocks Advance to Three-Week High Amid Earnings.
European stocks rose to a three-week high as companies from Deutsche
Bank AG to Statoil ASA reported earnings that beat estimates. Deutsche Bank climbed 2.2 percent after Europe’s largest investment bank said first-quarter profit dropped less than
projected. Statoil gained 4.5 percent. Nokia Oyj gained 2.9
percent after naming a new chief executive officer and saying it
will spend about 5 billion euros ($6.9 billion) on dividends,
share buybacks and debt reduction. ABB Ltd. fell the most in
four years after the world’s largest maker of power transformers
posted quarterly profit that missed estimates. The Stoxx Europe 600 Index rallied 1.2 percent, the most in
a week, to 338.12 at the close of trading in London.
- Apollo’s Rowan Sees ‘Danger Signs’ of Crisis in Debt Markets. Apollo
Global Management LLC (APO) co-founder Marc Rowan said he sees many
signs of a bubble in the credit markets that could lead to a financial
crisis. “All the danger signs are there of a future crisis,” Rowan
said today at the Milken Institute Global Conference in Beverly Hills,
California. “We’re back to doing exactly the
same things that were done in the credit markets during the
crisis. Our job is to step wisely and try to avoid that.”
Rowan joins a growing chorus of regulators and investors,
including Marathon Asset Management LP and DoubleLine Capital LP’s
Jeffrey Gundlach, expressing concern about aggressive underwriting
standards as the Federal Reserve’s zero-interest policy extends into a
sixth year.
- Senate Democrats Weigh Vote Backing Keystone XL.
U.S. Senate Democratic leaders are considering scheduling a vote on a
non-binding resolution urging approval of TransCanada Corp. (TRP)’s
Keystone XL pipeline, according to two Senate Democratic aides.
- Growing Concern on Job Openings Dents U.S. Confidence: Economy. Americans grew concerned in April
that jobs have become more difficult to land, prompting an
unexpected drop in confidence from a six-year high. The Conference Board’s sentiment index decreased to 82.3
from 83.9 a month earlier.
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
Financial Times:
Telegraph:
-
Nul points for EU’s stress-test comedy, but French property slump rings true. Be careful if you are planning to buy a house in
France. The EU stress test for banks released this morning expects
French property to fall 1.6pc this year and another 1pc in 2015 even if
things go well. The “adverse scenario” is a cumulative drop of 31pc by the end of
2016. This reflects the worries of French regulators who fed the data to
the European Banking Authority.
Valor:
- Brazil Carmakers See 2014 Truck Sales Falling 5-12%.
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -1.12% 2) Construction -.70% 3) Utilities -.62%
Stocks Falling on Unusual Volume:
- DDD, NRF, ROK, WNC, RYN, CLGX, KN, PRTA, GTLS, COH, GOGO, CLGX, ABB, SLAB, JEC, CP, TCS, WAT, SHPG, CHKP, CIT, DBD, GT, NANO, BSX, FTK, IPGP, ENT and ADEP
Stocks With Unusual Put Option Activity:
- 1) COH 2) RAX 3) EXC 4) CRUS 5) CZR
Stocks With Most Negative News Mentions:
- 1) GT 2) HCA 3) WAT 4) UIS 5) JEC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +4.11% 2) Coal +3.39% 3) Social Media +2.49%
Stocks Rising on Unusual Volume:
- FUR, ORB, CRUS, BWLD, KLIC, WLK, FDP, SGY, IRWD, WWW, WDAY, CBST, LMNX, HW, AMG, ATK, CRUS, MGM, SCOR, CMP, ADVS, DFRG, CLC, P, CNX, N and PBPB
Stocks With Unusual Call Option Activity:
- 1) CNX 2) THC 3) FE 4) WLL 5) SFLY
Stocks With Most Positive News Mentions:
- 1) MGM 2) CMI 3) HRB 4) T 5) IBM
Charts:
Evening Headlines
Bloomberg:
- U.S. Drip-Feed of Sanctions Seen Risking Putin Backlash. The
latest U.S. penalties against Vladimir Putin’s inner circle may provoke
the Russian president into escalating the Ukraine crisis without
crippling key sectors of his nation’s economy. The sanctions imposed by
the Obama administration yesterday on seven officials and 17 companies
won’t go unanswered, Deputy Foreign Minister Sergei Ryabkov told
Interfax. While markets showed relief as Russia’s largest banks avoided
U.S. measures, Putin may take this round personally,
according to Konstantin Simonov, president of Russia’s National
Energy Security Foundation.
- Russia Recession Risk Seen at Record High as Sanctions Escalate. Russia faces a fifty-fifty chance
of recession, the highest since Bloomberg started to track the
measure, as the crisis in Ukraine raises the risk of further
sanctions, according to a survey of economists. The probability of a recession over the next 12 months rose
to 50 percent, the highest since the first such Bloomberg survey
in June 2012, according to the median estimate of eight
economists surveyed before the U.S. and the European Union
announced their latest salvo of sanctions yesterday. The gauge
was at 45 percent last month.
- China’s Provinces Miss Growth Goals Even After Ambitions Lowered. Almost all Chinese provinces failed
to meet their growth targets in the first quarter even after
scaling back their ambitions as the government instructs
officials to focus on reining in debt and curbing pollution. Thirty of 31 provinces and municipalities reported missing
their goals, with the biggest shortfall in northeastern
Heilongjiang, where an expansion of 4.1 percent compared with an
8.5 percent target for the year. Most localities’ targets are lower
than in 2013. The latest data were released by government websites and
newspapers. Premier Li Keqiang risks the nation sliding into a deeper
slowdown as the government cracks down on overcapacity in the steel
industry, wrestles with shadow banking risks and rolls out
economic restructuring measures.
- Asian Stocks Swing From Gain to Loss on Earnings Outlook. Asian stocks swung between gains and losses as investors weighed corporate earnings and after U.S. equities advanced.
Posco climbed 3.1 percent after the Korean Economic Daily said South
Korea’s largest steelmaker is considering the sale of Daewoo
International Corp. Samsung Electronics Co. fell 0.1 percent in Seoul
after rising as much as 0.5 percent as the world’s No.1 maker of
smartphones posted first-quarter profit that beat analyst estimates.
Newcrest Mining Ltd., Australia’s
biggest gold producer, slipped 1.4 percent as the price of the
bullion headed for a second day of decline.
The MSCI Asia Pacific Excluding Japan Index was little
changed at 475.84 as of 9:49 a.m. in Seoul.
- Aluminum Declines to Lowest in Two Weeks as Inventories Expand. Aluminum fell to the lowest in more
than two weeks in London as inventories expanded. Copper declined for the first time in seven sessions. Inventories
of unwrought aluminum climbed to 1.215 million metric tons in March,
from a revised 1.171 million tons a month earlier, the International
Aluminium Institute said in a report today. In the warehouses tracked by
the London Metal Exchange, stockpiles rose for a third day to 5.3
million tons, the longest
stretch of gains this year.
- Zell Says Homeownership Rate to Fall as Marriages Delayed. The
U.S. homeownership rate may fall to as low as 55 percent because more
Americans are choosing to rent as they postpone getting married and
having children, said Sam Zell, chairman of landlord Equity Residential.
Demographic and lifestyle changes, more than economic factors, are
driving down the ownership rate over the long term, Zell said today at
the Milken Institute Global Conference in Beverly Hills, California. As
of 2010, about 54 percent of
adults were married, down from 57 percent a decade earlier,
according to the U.S. Census Bureau.
- LinkedIn(LNKD) Slumps as Social-Media Stock Plunge Accelerates.
The selloff in social-media stocks
is gathering steam. Facebook Inc. (FB), Twitter Inc. (TWTR), LinkedIn
Corp. (LNKD) and Yelp Inc. (YELP) fell today, marking at least four
straight days of declines. All have lost at least 19 percent of their
market value this year except Facebook, which is up 2.7 percent. That
stands in contrast to last year, when each stock was up by a record.
Investors are questioning whether the Web companies can keep up revenue
expansion, as some show signs of slowing gains in the number of users. Social-media
companies, which generate revenue via advertisements or subscriptions,
have been valued on their promises of fast growth, not the fundamentals
of their business, according to Jeff Sica, chief investment officer at
Sica Wealth Management LLC in Morristown, New Jersey.
Wall Street Journal:
Fox News:
CNBC:
- 'Almost every asset is overvalued': Apollo pro. "The quantitative easing and the excess money and the low interest rates
have driven pricing up of almost all financial assets to beyond what
their intrinsic value might be," Joshua Harris, co-founder and chief
investment officer of $161 billion private equity firm Apollo Global
Management, said Monday at the Milken Institute's Global Conference in
Los Angeles.
Zero Hedge:
ValueWalk:
Business Insider:
Reuters:
- US CFTC launches inquiry into evasion of swaps rules.
The U.S. swaps regulator
plans to research whetherU.S. banks' overseas trading activity is
complying with its rules, a senior official said on Monday, as Wall
Street adapts to new rules for the $690 trillion global market. Scott
O'Malia, a Republican member of the Commodity Futures Trading
Commision, said he had asked the agency's staff for a legal opinion on
whether U.S. banks were possibly evading its rules when doing business
in Europe.
Telegraph:
China Securities Journal:
- China May Use Fiscal Policy to Curb Overcapacity. China will
continue its proactive fiscal policy with fine-tuning at appropriate
times with more specific industry targets to curb overcapacity,
according to a front-page commentary, written by reporter Gu Xin.
Heavily polluting industries may have their export quotas reduced if
cos. fail to meet pollutant emission standards, the commentary wrote.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 128.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 88.75 -1.0 basis point.
- NASDAQ 100 futures +.21%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- S&P/CS 20 City MoM SA for February is estimated to rise +.8% versus a +.85% gain in January.
10:00 am EST
- Consumer Confidence for April is estimated to rise to 83.2 versus 82.3 in March.
Upcoming Splits
Other Potential Market Movers
- The
Senate vote on Fed Board nominations, Eurozone confidence/German CPI
reports, UK gdp report, weekly retail sales reports and the Barclays
Retail/Consumer Discretionary Conference could impact trading today.
BOTTOM LINE: Asian
indices are mostly lower, weighed down by technology and financial
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: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.29 +1.64%
- Euro/Yen Carry Return Index 148.10 +.41%
- Emerging Markets Currency Volatility(VXY) 8.27 -1.43%
- S&P 500 Implied Correlation 56.71 -2.83%
- ISE Sentiment Index 81.0 unch.
- Total Put/Call .90 -20.36%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.46 -1.25%
- European Financial Sector CDS Index 83.03 -.78%
- Western Europe Sovereign Debt CDS Index 35.19 -.37%
- Asia Pacific Sovereign Debt CDS Index 88.88 unch.
- Emerging Market CDS Index 290.01 -.97%
- China Blended Corporate Spread Index 354.89 +1.43%
- 2-Year Swap Spread 11.5 +.75 basis point
- TED Spread 22.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -2.0 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 226.0 +3.0 basis points
- China Import Iron Ore Spot $108.60/Metric Tonne -2.16%
- Citi US Economic Surprise Index -21.40 +3.9 points
- Citi Emerging Markets Economic Surprise Index -26.10 -.5 point
- 10-Year TIPS Spread 2.19 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +114 open in Japan
- DAX Futures: Indicating +11 open in Germany
Portfolio:
- Higher: On gains in my tech/medical/retail sector longs and index hedges
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
