Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Outperforming
Equity Investor Angst:
- Volatility(VIX) 11.77 -1.18%
- Euro/Yen Carry Return Index 145.07 +.21%
- Emerging Markets Currency Volatility(VXY) 6.96 -1.83%
- S&P 500 Implied Correlation 55.57 -.09%
- ISE Sentiment Index 125.0 +43.68%
- Total Put/Call .86 -2.27%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.73 -2.11%
- European Financial Sector CDS Index 79.48 -1.40%
- Western Europe Sovereign Debt CDS Index 39.44 -.25%
- Asia Pacific Sovereign Debt CDS Index 85.56 -.47%
- Emerging Market CDS Index 265.90 -.17%
- China Blended Corporate Spread Index 360.35 unch.
- 2-Year Swap Spread 15.5 unch.
- 3-Month EUR/USD Cross-Currency Basis Swap -5.75 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- China Import Iron Ore Spot $98.80/Metric Tonne +.30%
- Citi US Economic Surprise Index -.3 -3.5 points
- Citi Emerging Markets Economic Surprise Index -18.70 +3.0 points
- 10-Year TIPS Spread 2.22 +5.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +100 open in Japan
- DAX Futures: Indicating +7 open in Germany
Portfolio:
- Higher: On gains in my biotech/retail/tech sector longs
- Market Exposure: 75% Net Long
Bloomberg:
- Ukraine Forces Suffer Worst Losses of Crisis Amid Unrest. Fighting
flared anew in Ukraine four days before a presidential election, with
16 people killed near a checkpoint in the deadliest clash for the
military since the
secession campaign began after Russia annexed Crimea. An attack by
insurgents near Volnovakha, about 50
kilometers (31 miles) south of Donetsk, left 13 soldiers dead,
acting President Oleksandr Turchynov said in a statement on parliament’s
website. The local government said fighting left a total of 16 dead and
32 wounded. One soldier was killed and two injured in the Luhansk
region, the Defense Ministry said. “There’s a brutal war under way against our country,”
Turchynov said. “Ukraine will never return to a post-Soviet
neo-empire, which the Russian government dreams about.”
- French Recovery Fades as Manufacturing, Services Contract.
French manufacturing and services unexpectedly shrank this month,
highlighting President Francois Hollande’s struggle to revive the euro
area’s second-largest economy. A Purchasing Managers Index of factory
activity dropped to 49.3 from 51.2 in April, while a services gauge
fell to 49.2 from 50.4, Markit Economics said today in London.
Economists had forecast readings above 50, the level that divides
expansion from contraction. A composite gauge of both manufacturing
and services declined to 49.3 in May from 50.6 in April, Markit said. A
measure of new business also dropped and
employment fell at the fastest pace in three months. Markit said a
number of companies indicated that payrolls were cut “in line with
falling business activity.”
- European Stocks Rise for Second Day as Daily Mail Jumps. European stocks rose for a second day as better-than-forecast manufacturing figures in China and the U.S. offset euro-area output data. Daily Mail and General Trust Plc surged 8.9 percent after announcing Zoopla Property Group’s initial public offering. Raiffeisen Bank International AG added 6 percent after posting first-quarter profit that beat analysts’ estimates. Royal Mail Plc slid the most since its initial public offering last year after reporting earnings that missed projections. The Stoxx Europe 600 Index rose 0.2 percent to 341.02 at
the close in London.
- Finra Fines Cost JPMorgan 3 Minutes of Profit.
The world’s biggest bond dealers, including JPMorgan Chase & Co.
(JPM) and Morgan Stanley, failed to properly report trades to the
industry’s price-tracking system more than 11,000 times. JPMorgan’s
penalty: About three minutes
of its annual profit.
- Americans’ Outlook for U.S. Economy Falls to Seven-Month Low. Americans’ expectations for the economy deteriorated to a seven-month
low in May, a sign that the rebound from weakness earlier this year may
be limited by still-cautious consumers. An expectations gauge that tracks where the economy is heading declined to 42.5 in May from 48 in the month prior,
data from the Bloomberg Consumer Comfort Index showed today. The share
of respondents who said the economy was getting worse climbed to the
highest level this year. The weekly measure of sentiment declined to
34.1 in the period ended May 18 from 34.9, the third straight drop.
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
NY Times:
- Russia and China Block Security Council Move to Prosecute Syria War Crimes. Russia
and China on Thursday vetoed a Security Council resolution that would
have empowered the International Criminal Court to investigate and
prosecute war crimes in Syria, defying widespread support for such a
move by human rights advocates and many United Nations members,
including the United States. It
was the fourth time that Russia and China used their veto power as
permanent Security Council members to block any coercive action by the
international body in the Syrian conflict, which began more than three
years ago and has claimed at least 150,000 lives.
Reuters:
- Russia could build eight nuclear reactors for Iran. Russia
could sign an agreement this year to build eight new reactors for
nuclear power plants in Iran, state-run Russian news agency RIA reported
on Thursday, citing a source it did not identify. Russia built
Iran's only operating nuclear power reactor, at the Bushehr
plant.Longstanding Western fears that the Bushehr project could help
Iran develop nuclear weapons - something it denies it is seeking to do -
receded after Iran promised to send the spent fuel from the plant back
to Russia.
Xinhua:
- China Overcapacity to Take Years to Resolve, Survey Says. Survey
by State Council's Development Research Center says 68% of 3,545
enterprises represented at conference expect process to take more than 3
years; 23% say over 5 years.
Shanghai Securities:
- China
GDP Growth May Slow to About 5% in 2-3 Years. Ren Zeping, a researcher
at the Development Research Center of the State Council, expects China's
economy to grow about 5% for 20 years, after slowing to about 5% in 2-3
years, citing Ren. China's GDP growth may be about 6.0% next year.
Style Underperformer:
Sector Underperformers:
- 1) Education -5.4% 2) Coal -.83% 3) Oil Tankers -.19%
Stocks Falling on Unusual Volume:
- ESI, CDW, SALE, MOV, SHLO, PDCO, APOL, WB, WUBA, TPH, RXN, SINA, LO, PETM, CFN, SODA, AZN, SHLD, TGT, TSL, DV, BIS, STRA and RXN
Stocks With Unusual Put Option Activity:
- 1) WY 2) SIRI 3) IPG 4) UPL 5) GME
Stocks With Most Negative News Mentions:
- 1) TGT 2) EBAY 3) GM 4) SODA 5) SINA
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Biotech +2.70% 2) Gaming +1.64% 3) Homebuilders +1.62%
Stocks Rising on Unusual Volume:
- NTLS, SN, BRC, PLCE, DLTR, WSM, BBY, BCEI, BONT, PHH, SMTC, EJ, MNRO, TRLA, ICPT, IDCC, NSR, PHH, CREE, DF, CYH and BWP
Stocks With Unusual Call Option Activity:
- 1) WY 2) CVA 3) TSO 4) CREE 5) DHR
Stocks With Most Positive News Mentions:
- 1) BBY 2) DLTR 3) MON 4) DDD 5) YELP
Charts:
Evening Headlines
Bloomberg:
- Putin Tilts to Asia With $400 Billion China Gas Deal. Russia’s
$400 billion deal to supply natural gas to China after more than a
decade of negotiations is tilting the world’s largest energy exporter
toward Asia as ties worsen with the U.S. and Europe. Russian President Vladimir Putin is turning eastward as
sanctions imposed by the U.S. and the European Union because of
the standoff over Ukraine batter the Russian economy. The
increasing alienation makes trade with China, the country’s
largest trading partner after the two-way volume surged
sevenfold in the past decade to about $94 billion last year,
even more important.
- Blast Rocks Open-Air Market in China’s Restive Xinjiang Region. An explosion tore through an open-air
market in China’s restive northwestern province of Xinjiang,
causing an unknown number of casualties. Photos circulated on the Internet that purported to show
the aftermath of the blast revealed at least three bodies in a
tree-lined street strewn with produce about 50 yards in front of
a fire. In a second photograph, a police official in a white
helmet and flack jacket directed traffic away from the fire. The official Xinhua News Agency said the explosion was
“caused by vehicle collisions” and occurred at about 8 a.m.
today in Xinjiang’s capital, Urumqi. It said an unknown number
of people were hospitalized.
- Spy Charges Ratchet Up Fears for Multinationals in China.
Google Inc. (GOOG) sends an e-mail to some employees traveling to China
warning that it’s a “restricted country” and online access to some
internal systems will be limited, according to a person familiar with
company policy. Kyocera Corp. (6971) only makes photovoltaic cells in
Japan and is reviewing cybersecurity measures at its solar-panel
assembly plant in Tianjin.Infineon Technologies AG, Europe’s
second-biggest chipmaker, fends off thousands of attacks from China
every day, although most are amateurish, said a person familiar
with the situation.
- Weibo Net Loss Doubles on Spending to Attract New Users. Weibo Corp. (WB)’s net loss more than doubled in the first quarter as the Chinese microblogging service controlled by Sina Corp. (SINA) spent more to attract users. The first-quarter net loss was $47.4 million, compared with a loss of $19.2 million a year
earlier, the Beijing-based company said in a statement yesterday. The
loss matched the preliminary estimate provided in its listing
prospectus.
- Boko Haram Survivor's Story Puts Face on Islamic Terrorists. The untold victims of Boko Haram now have a face and a voice in the U.S. Deborah
Peter was 12 years old when gunmen from the Nigerian terrorist group
burst into her home in northern Nigeria and shot dead her father, a
Christian pastor, and her 14-year-old brother Caleb, and then forced her
to lie with their corpses. Peter, now 15 and attending a
Christian school in rural Virginia, came to the U.S. Capitol today to
recount her ordeal for leaders of the House Foreign Affairs Committee.
She was attacked in 2011, well before Boko Haram’s abduction of more
than 250 schoolgirls and young women in April finally drew international
attention and condemnation.
- Brazil World Cup Victory Risks Stock Losses in Boon to Rousseff. A defeat for the five-time winners of soccer’s championship
would be a blow to President Dilma Rousseff’s re-election bid,
Carvalho said, bolstering the chances for a new government that
would be friendlier to investors after the worst economic
performance of any administration since 1992. As polls started showing Rousseff losing popularity before
October’s vote, Brazilian stocks have posted the world’s best
returns in dollar terms since mid-March, rebounding from a bear-market bottom.
- Asian Stocks Rise First Time in Five Days on Fed, China.
Asian stocks rose for the first time in five days after Federal Reserve
meeting minutes showed policy
makers see a muted risk of inflation from continued U.S.
stimulus and a China manufacturing gauge topped estimates. Fuji Heavy
Industries Ltd. climbed 4.4 percent in Tokyo, pacing a gain among
consumer-discretionary shares that posted the largest advance among the
10 industry groups on the MSCI Asia Pacific Index. James Hardie
Industries Plc rose 2.8 percent in Sydney after the maker of building
materials said it will buy back shares and increase spending on
projects. Sanrio Co. slumped 19 percent in Tokyo, the most since 1985,
on concern about earnings after yesterday’s strategy briefing from the
maker of Hello Kitty toys. The MSCI Asia Pacific index gained 0.9
percent to 139.91 as of 9:57 a.m. in Hong Kong. The measure fell 1.3
percent over the past four days amid concern about China’s growth
outlook and after valuations last week climbed to a six-week high
- Leader of Veterans’ Group Says Obama ‘Dithering’ on VA. President
Barack Obama is “dithering” and has offered “no real action” to correct
delays in health care at military veterans’ hospitals, the head of a
veterans’ advocacy group said. “Our membership is tremendously
disappointed,” said Paul Rieckhoff, founder and chief executive officer
of Iraq and Afghanistan Veterans of America, which says it represents
about 300,000 combat vets. “We expected to hear some news, that he was
really going to tear into this issue with the severity that it deserves,
and we didn’t hear that,” Rieckhoff said in an interview on Bloomberg
Television’s “Political Capital with Al Hunt” airing this weekend.
- Facebook(FB) to Google(GOOG) Say NSA Spying Bill is Unacceptable. A
group of technology companies,
including Facebook Inc. (FB), Google Inc. (GOOG) and Apple Inc. (AAPL),
said the bill U.S. lawmakers plan to vote on tomorrow to limit National
Security Agency spying doesn’t go far enough. The legislation “has moved in the wrong direction,” the
Reform Government Surveillance coalition said in a statement
today. The coalition formed last year in an effort to distance
Internet companies from perceptions that they willingly
cooperated with government surveillance programs.
Wall Street Journal:
- Fears of 'Chaos' in East as Ukraine Readies Presidential Vote. Kiev Insists Election to Go Ahead Sunday, Despite Vows by Rebels to Block Them. For the first time in more than two decades of Ukrainian
independence, Konstantin Kaliberda doubts he will be opening his local
School No. 17 for a coming election, despite the crucial role Sunday's
presidential vote is meant to play in holding the country together. "We've
received no instructions and had no meetings. Normally, we'd have the
voter lists by now, but the people at the district election commission
are scared and not doing anything," said Mr. Kaliberda, a 47-year-old
election...
MarketWatch.com:
- Fed’s easy-money strategy won’t be easy to end, official says. Easy money in doesn’t necessarily mean easy money out. So says a top
Federal Reserve official who’s been critical of the central bank’s
massive bond-buying stimulus campaign to keep U.S. interest rates ultra
low.
Kansas City Fed President Esther George says the longer interest
rates remain low, the greater the risk for the central bank once it
begins to revert to a more normal monetary policy. The Fed “is going to
be challenged with its timing,” she said Wednesday after a speech in
Washington.
CNBC:
Zero Hedge:
ValueWalk:
Business Insider:
Cleveland.com:
- Where VA has taken veterans, Obamacare is leading all Americans: Kevin O'Brien. Another conclusion is probably just dawning on those Americans with
the wit to see it, because so very few of us have had a brush with a
medical system of which government is the sole proprietor: Putting a
government bureaucracy in charge of one's health is a gamble likely to
end badly. And yet, if Obamacare stands, that is precisely the gamble each and every American eventually will take.
Reuters:
- Exclusive: Vietnam PM says considering legal action against China over disputed waters. Vietnamese
Prime Minister Nguyen Tan Dung said his government was considering
various "defense options" against China, including legal action,
following the deployment of a Chinese oil rig to disputed waters in the
South China Sea.
Dung's comments, given
in a written response to questions from Reuters, are the first time he
has suggested Vietnam would take legal measures, a threat likely to
infuriate Beijing.
Telegraph:
Securities Times:
- China Shouldn't Change Monetary Policy Tone. China shouldn't make
fundamental changes to its monetary policy given the current economic
situation and can still use fiscal policy to support economic growth,
according to a front-page commentary.
Evening Recommendations
Sanford Bernstein:
- Rated (VZ) Outperform, target $57.
Night Trading
- Asian equity indices are +.50% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 118.0 -5.0 basis points.
- Asia Pacific Sovereign CDS Index 86.0 -1.75 basis points.
- NASDAQ 100 futures +.30%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Chicago Fed Nat Activity Index for April is estimated to fall to 0.0 from .2 in March.
- Initial Jobless Claims are estimated to rise to 310K versus 297K the prior week.
- Continuing Claims are estimated to rise to 2675K versus 2667K prior.
9:45 am EST
- The Preliminary Markit US Manufacturing PMI for May is estimated to rise to 55.5 versus 55.4 in April.
10:00 am EST
- Existing Home Sales for April are estimated to rise to 4.69M versus 4.59M in March.
- The Leading Index for April is estimated to rise +.4% versus a +.8% gain in March.
11:00 am EST
- The Kansas City Fed Manufacturing Activity Index for May is estimate at 7.0 versus 7.0 in April.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Williams speaking, Eurzone PMI report, UK gdp report, weekly EIA
natural gas inventory report, Bloomberg Economic Expectations Index for
May, weekly Bloomberg Consumer Comfort Index, (RVBD) annual meeting and
the (AFL) analyst briefing could impact trading today.
BOTTOM LINE: Asian indices are higher, boosted by industrial and technology 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: Modestly Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.18 -6.02%
- Euro/Yen Carry Return Index 144.68 -.14%
- Emerging Markets Currency Volatility(VXY) 7.18 -.28%
- S&P 500 Implied Correlation 54.76 -4.62%
- ISE Sentiment Index 84.0 -8.70%
- Total Put/Call .92 -1.08%
Credit Investor Angst:
- North American Investment Grade CDS Index 65.71 -.53%
- European Financial Sector CDS Index 80.61 -1.34%
- Western Europe Sovereign Debt CDS Index 39.95 +4.44%
- Asia Pacific Sovereign Debt CDS Index 87.27 -1.27%
- Emerging Market CDS Index 267.30 -.99%
- China Blended Corporate Spread Index 360.35 +.23%
- 2-Year Swap Spread 15.5 unch.
- TED Spread 19.75 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -6.0 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 221.0 +3.0 basis points
- China Import Iron Ore Spot $98.50/Metric Tonne +1.03%
- Citi US Economic Surprise Index 3.20 -.1 point
- Citi Emerging Markets Economic Surprise Index -21.70 +1.6 points
- 10-Year TIPS Spread 2.17 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +142 open in Japan
- DAX Futures: Indicating -7 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/medical/tech sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
