Broad Equity Market Tone:
- Advance/Decline Line: Slightly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.09 +1.85%
- Euro/Yen Carry Return Index 145.81 unch.
- Emerging Markets Currency Volatility(VXY) 7.23 +.28%
- S&P 500 Implied Correlation 53.11 -2.78%
- ISE Sentiment Index 97.0 +27.63%
- Total Put/Call .71 -23.66%
Credit Investor Angst:
- North American Investment Grade CDS Index 61.87 -.46%
- European Financial Sector CDS Index 71.50 -.92%
- Western Europe Sovereign Debt CDS Index 34.65 -1.41%
- Asia Pacific Sovereign Debt CDS Index 79.90 +.11%
- Emerging Market CDS Index 256.08 +.72%
- China Blended Corporate Spread Index 318.80 -1.37%
- 2-Year Swap Spread 13.75 +.25 basis point
- TED Spread 20.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -10.0 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 221.0 +2.0 basis points
- China Import Iron Ore Spot $94.60/Metric Tonne +2.27%
- Citi US Economic Surprise Index -13.70 -11.6 points
- Citi Emerging Markets Economic Surprise Index -21.60 +1.0 point
- 10-Year TIPS Spread 2.17 -2.0 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/medical/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Obama Meets Ukraine Leader Amid Fighting on Russia Border. President
Barack Obama met Ukrainian President-elect Petro Poroshenko for the
first time as the leaders seek ways to defuse a pro-Russian uprising
that’s claimed almost 200 lives in the former Soviet republic.
Poroshenko told reporters he’s committed to a “peaceful” process, while
Obama pledged to step up non-lethal military support to Ukraine. The
leaders held talks today in Warsaw, Poland, Ukraine’s western neighbor
and a leading critic among European Union and NATO members of Russia’s
annexation of Crimea in March, which the
U.S. and the EU consider illegal.
- Tiananmen Vigil Draws Hong Kong Crowds 25 Years After Crackdown. Tens of thousands of people attended a vigil in Hong Kong
last night to mark the 25th anniversary of the 1989 Tiananmen Square
crackdown, calling on China to vindicate the student movement that led
the protests. Visitors to the event at Victoria Park were greeted
with loudspeakers broadcasting slogans and banners demanding an end to
the rule of the Chinese Communist Party. A human-sized Goddess of
Democracy statue stood in the park, where many were sitting. As night
fell, hundreds lit candles and observed a moment of silence at 8:38 p.m.
after organizers placed wreaths to commemorate those who lost their
lives.
- Iron Ore Cargoes at Record as Mines Boost Production. Iron
ore shipments from Australia’s Port Hedland expanded to a record in May
as mining companies boosted output, helping to push benchmark prices to
the lowest level since 2012 and contributing to a rising global
surplus. Exports from the world’s largest bulk export terminal surged to
36.1 million metric tons from 34.8 million tons in April and 27.9
million tons in May 2013, data on the port authority’s website
showed today. Shipments to China were a record 29.9 million tons in May
compared with 28.9 million tons
in April and 23.3 million tons a year earlier, the data showed. The
global seaborne surplus will jump from 14 million tons
last year to 72 million tons in 2014 and 175 million tons in
2015, Goldman Sachs Group Inc. said in a May 20 report.
Worldwide supplies will expand 10 percent in 2014, outstripping
the 3.7 percent rise in demand, Morgan Stanley predicts. A further slide
in the price would place competitors under pressure, Rio Tinto (RIO)
Group Chief Executive Officer Sam Walsh said in an interview with
Bloomberg Television yesterday, describing
$80 as too low.
- Investors Flag Risk of ECB Disappointing After Europe Bond Rally.
Firms from Pioneer Investment
Management Ltd. to AllianceBernstein Holding LP say the odds are high
that measures the European Central Bank will announce to stimulate the
region’s economy will fall short of the bond market’s lofty
expectations. Yields on bonds from Belgium, France, Italy and Spain
have fallen to records in the past month amid speculation policy makers
meeting tomorrow may add unconventional measures, such as quantitative
easing, in addition to lowering interest rates. The euro has fallen
about 2.7 percent from a more than two-and-a-half year high of $1.3993
on May 8 before ECB President Mario Draghi said the central bank was
“comfortable” taking measures
to boost inflation.
- Europe Stocks Little Changed as Investors Seek ECB Clues. European stocks were little changed as investors weighed data on the euro-area economic growth for clues to European Central Bank’s policy decision tomorrow. Volkswagen AG dropped 1.5 percent, leading automakers lower, as it sold 2 billion euros ($2.7 billion) of preferred shares to help pay for the takeover of Scania AB. Dufry AG rallied the most since October 2011 after agreeing to buy travel retailer Nuance Group. Coloplast A/S rose 3.2 percent after projecting annual growth of as much as 10 percent in revenue excluding acquisitions for the next three to five years. The Stoxx Europe 600 Index added less than 0.1 percent to 343.56 at the close in London.
- Profit Decline Waves U.S. Economy Caution Flag: Chart of the Day. Falling corporate earnings pose a
risk for the current U.S. economic expansion that deserves more attention from investors,
according to Albert Edwards, a global strategist at Societe Generale
SA. The CHART OF THE DAY shows how Edwards drew his conclusion in a
report yesterday. He tracked profit after adjustment for
changes in inventory values and depreciation, an accounting
charge that reduces the value of assets. The figures are
compiled quarterly by the Commerce Department. Adjusted pretax earnings fell 9.8 percent in the first
quarter, according to data released last week. The drop was the
steepest since the fourth quarter of 2008, when profit tumbled
26 percent in the midst of a recession and financial crisis.
- Medtronic(MDT) Said to Evaluate Takeover of Smith & Nephew.
Medtronic Inc. (MDT), one of the world’s largest medical-device makers,
is evaluating a takeover of London-based Smith & Nephew Plc (SN/)
that could see the U.S. company move its tax domicile overseas, people familiar with the matter said.
Fox News:
- Data problems found with 2 million ObamaCare sign-ups, document shows. More than 2 million people who got health insurance under President
Obama's law have data discrepancies that could jeopardize coverage for
some, a government document shows. About 1 in 4 people who signed up have discrepancies, creating a huge
paperwork jam for the feds and exposing some consumers to repayment
demands, or possibly even loss of coverage, if they got too generous a
subsidy.
- Bergdahl had left base before, according to 2010 report. If Bowe Bergdahl walked off his base voluntarily before ending up in
the hands of the Taliban -- as several of his former fellow soldiers are
claiming, it may not have been the first time the then-private first
class wandered away in serious violation of military regulations, Fox
News has learned.
The exact circumstances that led to Bergdahl's capture in Afghanistan
are not known to the public, but a classified 2010 Army investigation
concluded he had “willfully walked off base,” two senior defense
officials told Fox News.
CNBC:
- Beige Book: Economic growth increases in all 12 districts. Economic growth increased in all 12 Federal Reserve districts, a relatively upbeat Fed Beige Book showed on Wednesday. The pace of growth was described as "moderate" to
"modest," according to the release, which details economic projections
from the central bank's members.
ZeroHedge:
Business Insider:
Reuters:
- Fed may shun global risk rules banks spent billions to meet. The Federal Reserve
may scrap elements of international measures aimed at assessing
bank health in favor of imposing its own rules, frustrating
bankers who have spent billions of dollars retooling their books
to meet global standards.
Financial Times:
Style Underperformer:
Sector Underperformers:
- 1) Energy -.51% 2) Drugs -.50% 3) Papers -.44%
Stocks Falling on Unusual Volume:
- EBIX, TIBX, LG, CYBX, CLVS, RENT, BNNY, TRN, BMY, VRX, COH, AEGN, JKS, ARUN, PBYI, RTRX, FGP, CSIQ and FOE
Stocks With Unusual Put Option Activity:
- 1) DGX 2) KMP 3) MNKD 4) MOS 5) GM
Stocks With Most Negative News Mentions:
- 1) ICE 2) P 3) TIBX 4) GEOS 5) COH
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Insurance +1.23% 2) Biotech +.73% 3) Steel +.53%
Stocks Rising on Unusual Volume:
- PL, RXN, VNDA, FSLR, RNA, AEGR, SPWR, VLCCF, NWL, MBI, WAG, EXAS, ALDR, ICPT, NYLD and X
Stocks With Unusual Call Option Activity:
- 1) END 2) DG 3) XOP 4) DIS 5) ALTR
Stocks With Most Positive News Mentions:
- 1) WAG 2) APA 3) GOOG 4) LNKD 5) RL
Charts:
Evening Headlines
Bloomberg:
- World Bank Approves First Russia Investment Since Crisis. The
World Bank approved an investment in Russia for the first time since
President Vladimir Putin annexed Crimea, overriding opposition from
Canada and lack of support from the U.S. The International Finance
Corp., the lender’s private-sector arm, voted May 29 for parts of a 250
million euro ($340 million) package enabling French grocery retailer
Groupe Auchan SA to expand in Russia, Vietnam and other emerging
markets, World Bank spokeswoman Serene Jweied said yesterday in an
e-mail.
- Asia Territory Spats Pose Real Danger to Trade, Singapore Warns. The
risk of territorial disputes
damaging trade in Asia is “very real” and the region must focus on
shoring up economic links as well as security ties, according to
Singapore Defence Minister Ng Eng Hen. “It’s completely artificial to think that there are somehow firewalls between trade and security,”
Ng, 55, said yesterday in an interview at the Ministry of Defence. “We
shouldn’t from a security point of view be dominating headlines every
few other days and I don’t think it’s necessarily a
positive if this continues for the region. At some point it may
impact trade and our real economies.”
- Russian Military Jet Intercepted U.S. Plane Near Japan.
A Russian Su-27 Flanker fighter jet
intercepted a U.S. surveillance plane off Russia’s east coast near Japan
in April, flying unusually close, as tensions rose over the Ukraine
crisis. The U.S. RC-135U Combat Sent electronic intelligence plane made
by Boeing Co. (BA) was conducting a routine mission over the Sea of
Okhotsk north of Japan on April 23 when the Russian fighter flew within
about 100 feet (30 meters) of its nose, Rear Admiral John Kirby, a
Pentagon spokesman, said today. Asked why the Pentagon didn’t disclose the incident until
it was reported today by the Washington Free Beacon, spokesman
Army Colonel Steve Warren said, “I don’t have a good answer for
you.”
- Nespresso Falls Victim to Mining Cutbacks as China Cools. China’s
reduced craving for raw materials is driving mining companies to go to
extreme measures to cut costs amid steadily falling prices. Having
already cut billions of dollars, mining companies are now scratching
for savings wherever they can find them, from renegotiating rubber
contracts for tires, to adopting driverless trucks and trains. Even
menus aren’t exempt.
- Brookstone Won With $173 Million Bid by Chinese Buyers. Brookstone Inc., the bankrupt luxury-gadget retailer, agreed to sell its assets to a group of Chinese
buyers for more than $173 million, after they outbid a unit of
Spencer Spirit Holdings Inc. at an auction, a lawyer said.
- Asian Stocks Retreat From 7-Month High Before U.S. Jobs.
Asian stocks fell, with regional benchmark index retreating from a
seven-month high, as investors await a report on U.S. jobs and a
decision from the European Central Bank on monetary policy. Santen
Pharmaceutical Co. dropped 1.5 percent in Tokyo, leading a decline among
health-care shares. Australand Property Group. climbed to a six-year
high in Sydney after Frasers Centrepoint Ltd., a Singapore property
company spun off from Fraser & Neave Ltd., trumped Stockland’s offer
to buy the firm. JFE Holdings Inc. climbed 3.1 percent after Credit
Suisse Group AG advised buying shares of the Japanese steelmaker. The MSCI Asia Pacific Index (MXAP) slid 0.2 percent to 142.84 as of 9:52 a.m. in Hong Kong as more than four stocks fell for
every three that rose.
- Juncker Boosted as EU’s Christian Democrats Widen Lead.
Europe’s Christian Democrats widened their lead over other political
groups in the European Parliament after last month’s elections,
bolstering Jean-Claude Juncker’s bid to take over the bloc’s top
executive job. The Christian Democrats won 221, or 29 percent, of the
751 seats in the incoming European Union assembly, according to an
update it releasedyesterday in Brussels of the May 22-25
election results. That compares with 214 seats estimated June 2
and last week.
Wall Street Journal:
- Ukrainian Forces Clash With Pro-Russian Rebels. Kiev Acknowledges 181 People Dead as a Result of Military Action in Eastern Ukraine.
- After Guantanamo, Freed Detainees Returned to Violence in Syria Battlefields. Release of Five Senior Taliban Figures from the U.S. Detention Center Renews Debate.
- The Accelerating Spread of Terrorism. Since 2010, there has been a 58% increase in the number of jihadist groups world-wide. President Obama's decision to withdraw troops from Afghanistan by
2016 is a risky step and may embolden Islamic extremists. So could the
release of five high-level prisoners from Guantanamo Bay in a swap with
the Taliban to win the freedom of Sgt. Bowe Bergdahl. The number
of al Qaeda and other jihadist groups and fighters are growing, not
shrinking. U.S. disengagement—or even risking the return of terrorists
to the field by freeing them from detention—is not the answer to the
threat they pose. Instead, U.S. strategy...
- Health Care Is Our Other Afghanistan. The president and his worker bees believe in ObamaCare about as much as they believe in the Afghanistan war.
Fox News:
- Boehner: Lawmakers briefed on Bergdahl trade 2 years ago, had 'serious' concerns. Top congressional leaders were briefed more than two years ago about
the possible exchange of five Guantanamo prisoners for American soldier
Sgt. Bowe Bergdahl, but raised "serious" concerns from the outset about
the risks of such a trade, officials say. House Speaker John Boehner and others provided new details Tuesday
about the prior deliberations, and voiced grave concern that the
administration charged ahead with the prisoner swap over the weekend
without Congress' approval.
- Federal regs for auto dealers costing US economy more than $10B, study says. Federal regulations for auto dealers are costing America's economy more
than $10 billion in lost sales and employment each year, according to a
new study conducted by the Center for Automotive Research provided to
Fox News.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Financial Times:
- Russia and China plan own rating agency to rival western players. Russia
and China have agreed to set up a joint rating agency as Moscow’s
stand-off with the west over Ukraine has made it more eager to establish
institutions that would reduce its dependence on the US and Europe. “In the beginning, the agency will assess Russian-Chinese
investment projects with a view to attracting of [investors from] a
number of Asian countries,” Anton Siluanov, Russia’s finance minister,
said in Beijing, according to his ministry. “Gradually, based on the
progress and authority of such an agency, we believe it will rise to a
level where its opinions will attract other countries.”
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 106.50 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 79.75 +.75 basis point.
- NASDAQ 100 futures -.10%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (CYBX)/.04
- (BF/B)/.58
- (HOV)/.03
- (FIVE)/.06
- (PVH)/1.49
Economic Releases
8:15 am EST
- The ADP Employment Change for May is estimated at 210K versus 220K in April.
8:30 am EST
- The Trade Deficit for April is estimated at -$40.8B versus -$40.4B in March.
- Final 1Q Non-Farm Productivity is estimated at -3.0% versus a prior estimate of -1.7%.
- Final 1Q Unit Labor Costs are estimated to rise +5.3% versus a prior estimate of a +4.2% gain.
9:45 am EST
- Final Markit US Services PMI for May is estimated at 58.2 versus a prior estimate of 58.4.
10:00 am EST
- The ISM Non-Manufacturing Composite for May is estimated to rise to 55.5 versus 55.2 in April.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-160,000 barrels versus a +1,657,000 barrel gain the prior week.
Gasoline supplies are estimated to rise by +140,000 barrels versus a
-1,803,000 barrel decline the prior week. Distillate inventories are
estimated to rise by +640,000 barrels versus a -196,000 barrel decline
the prior week. Finally, Refinery Utilization is estimated to rise by
+.18% versus a +1.2% gain the prior week.
2:00 pm EST
- U.S. Fed Releases Beige Book.
Upcoming Splits
Other Potential Market Movers
- The
Eurozone Services PMI, Bank of Canada decision, weekly MBA mortgage
applications report and the Deutsche Bank Industrials/Basic Materials
Conference could impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and real estate shares in the region. I expect US stocks to open modestly lower and to rally 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: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 11.81 +1.98%
- Euro/Yen Carry Return Index 145.77 +.33%
- Emerging Markets Currency Volatility(VXY) 7.16 +.14%
- S&P 500 Implied Correlation 55.05 -.79%
- ISE Sentiment Index 75.0 -21.98%
- Total Put/Call .93 +34.78%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.10 -.44%
- European Financial Sector CDS Index 72.17 +.16%
- Western Europe Sovereign Debt CDS Index 34.95 -.58%
- Asia Pacific Sovereign Debt CDS Index 79.81 +1.02%
- Emerging Market CDS Index 254.26 +1.52%
- China Blended Corporate Spread Index 323.23 -.93%
- 2-Year Swap Spread 13.50 unch.
- TED Spread 19.75 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.75 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 219.0 +5.0 basis points
- China Import Iron Ore Spot $92.50/Metric Tonne +.43%
- Citi US Economic Surprise Index -2.10 +1.1 points
- Citi Emerging Markets Economic Surprise Index -22.60 -.5 point
- 10-Year TIPS Spread 2.19 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +22 open in Japan
- DAX Futures: Indicating -5 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/medical/retail sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
