Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 12.50 +7.76%
- Euro/Yen Carry Return Index 143.96 -.12%
- Emerging Markets Currency Volatility(VXY) 6.54 -1.36%
- S&P 500 Implied Correlation 53.93 +4.77%
- ISE Sentiment Index 80.0 -21.57%
- Total Put/Call .82 +10.81%
Credit Investor Angst:
- North American Investment Grade CDS Index 59.64 +2.10%
- European Financial Sector CDS Index 60.02 -.17%
- Western Europe Sovereign Debt CDS Index 28.08 -.32%
- Asia Pacific Sovereign Debt CDS Index 76.61 +1.62%
- Emerging Market CDS Index 246.64 +1.99%
- China Blended Corporate Spread Index 311.51 -.20%
- 2-Year Swap Spread 14.75 +.25 basis point
- TED Spread 19.5 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -12.0 -2.5 basis points
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 217.0 -4.0 basis points
- China Import Iron Ore Spot $91.50/Metric Tonne -2.14%
- Citi US Economic Surprise Index -17.60 -4.6 points
- Citi Emerging Markets Economic Surprise Index -6.60 +3.0 points
- 10-Year TIPS Spread 2.19 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -143 open in Japan
- DAX Futures: Indicating -38 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- Iraq Battles Islamists in Saddam’s Hometown, 80 Miles From Baghdad. Iraqi
forces sought to check the rapid advance of Islamist militants
who had seized major cities, as Prime Minister Nouri al-Maliki responded
to the greatest threat to his government since taking power. The
military attacked fighters of the Islamic State in Iraq and the Levant
in Saddam Hussein’s former hometown of Tikrit, about 80 miles (130
kilometers) north of Baghdad, state-sponsored Iraqiya television
reported. In Mosul, the air force struck ISIL positions after they
seized the largest city in Iraq’s
north earlier this week, Iraqiya said. Al-Sumaria television reported
heavy clashes as the army fought for Tikrit backed by air support.
- China’s No-Money-Down Housing Echoes U.S. Subprime Lending Risks. China’s home buyers are being offered no-money-down purchases in an echo of the subprime lending that triggered a U.S. economic meltdown and the global
financial crisis. Deals skirting government requirements for minimum 30
percent down payments have emerged this year from Guangzhou and
Shenzhen in the south to Beijing in the north as real-estate
sales slump, according to state media and statements by
government agencies and developers.
- European Stocks Little Changed as Bouygues, Iliad Gain.
European stocks were little changed as the benchmark index pared gains
after data showed U.S. retail sales grew slower than estimated and more
Americans than forecast made jobless claims. Bouygues SA rose 5.2
percent after a report that Orange SA is studying a cash offer for its
telecommunications unit and Iliad (ILD) SA advanced 6.3 percent after
France said it’ll push for a merger among phone companies. Anglo
American Plc dropped 3.2 percent, leading a gauge of commodity producers
lower, after Morgan Stanley recommended selling the stock. The Stoxx Europe 600 Index added less than 0.1 percent to 347.83 at the close in London.
- Delta Tumbles Most in S&P 500 as Oil Rises on Iraq Strife.
Delta Air Lines Inc. (DAL) fell the most on the Standard &
Poor’s 500 Index, extending a decline among U.S. carriers, as violence
in Iraq pushed oil prices to an eight-month high. “It’s primarily crude,
given the jump up and the uncertainty and tension,” Savanthi Syth, a
Raymond James Financial Inc. analyst, said in an interview. “Crude
jumping up has an impact on earnings in the shorter term. Longer term,
hopefully they can push through fare increases to cover that.” Jet
fuel, refined from crude, and labor are airlines’ largest expenses.
Delta fell 5.5 percent to $38.48 at 11:18 a.m. in New York, while
Southwest Airlines Co. (LUV)’s 4.5 percent tumble was the second-biggest
on the S&P 500.
Wall Street Journal:
- Kurdish Forces Take Control in Northern Iraqi City of Kirkuk. Move Comes as Forces of the Shiite-Dominated
Government of Prime Minister Nouri al-Maliki Abandon Posts and Flee,
Provincial Official Says. Iraq edged closer to all-out sectarian conflict on Thursday as Kurdish forces took control of a provincial capital in
the oil-rich north and Sunni militants threatened to march on the
capital Baghdad and two cities revered by Shiite Muslims.
CNBC:
ZeroHedge:
Business Insider:
FINalternatives:
- Hedge Fund Inflows Jump. Investors added more money to hedge funds this month than in any of the last four,
according to SS&C Technologies. The SS&C GlobeOp
Capital Movement Index rose 1.01% in June to hit “their highest levels
in four months,” SS&C CEO Bill Stone said. The metric measures
net subscriptions and redemptions received by hedge funds administered
on SS&C’s GlobeOp platform.
Washington Post:
- ISIS just stole $425 million and became the ‘world’s richest terrorist group’. Of
the many stunning revelations to emerge out of the wreckage of
Mosul on Wednesday — 500,000 fleeing residents, thousands of freed
prisoners, unconfirmed reports of “mass beheadings” — the one that may
have the most lasting impact as Iraq descends into a possible civil war
is that the Islamic State of Iraq and Syria just got extremely rich.
As insurgents rolled past Iraq’s second largest city, an oil hub at the
vital intersection of Syria, Iraq and Turkey, and into Tikrit, several
gunmen stopped at Mosul’s central bank. An incredible amount of cash was
reportedly on hand, and the group made off with 500 billion Iraqi
dinars — $425 million. The provincial governor of Nineveh, Atheel
al-Nujaifi, confirmed that the ISIS Islamists had lifted additional
millions from numerous banks across Mosul, as well as a “large quantity
of gold bullion,” according to the International Business Times, which
called it the “World’s Richest Terror Force.”
USAToday:
Reuters:
- Brazil's retail sales drop 0.4 pct in April from March.
Retail sales in Brazil dropped for a second straight month in April,
highlighting the weak state of Latin America's largest economy as one of
its main growth engines rapidly loses steam. Retail sales volumes in
Brazil fell 0.4 percent in April from March, twice as much as the 0.2
percent expected in a Reuters polls, the statistics agency IBGE said on
Thursday. Higher interest rates, stubborn inflation and dwindling
confidence have weighed on consumers, depriving the Brazilian economy of
one of its few reliable sources of growth.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Airlines -3.21% 2) Coal -2.24% 3) Road & Rail -1.43%
Stocks Falling on Unusual Volume:
- APU, LULU, CLV, EXC, PBF, SC, CXDC, AL, RRC, AAL, DAL, INFY, RIO, SWC,
UAL, CBI, SAVE, ALK, CEVA, HA, CLF, LUV, SYNA, CPSI, FII, JBLU and SLCA
Stocks With Unusual Put Option Activity:
- 1) JBLU 2) XLE 3) IYT 4) XLK 5) XLP
Stocks With Most Negative News Mentions:
- 1) LULU 2) DAL 3) SAVE 4) SFUN 5) SCCO
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.55% 2) Oil Service +.78% 3) Energy +.71%
Stocks Rising on Unusual Volume:
- RH, BDSI, LE, EXP, TWTR, GTAT, RMBS, SPWR, HALO, NMBL, AUXL and SN
Stocks With Unusual Call Option Activity:
- 1) PPL 2) SIRI 3) GERN 4) UPL 5) RH
Stocks With Most Positive News Mentions:
- 1) HPQ 2) BKS 3) RH 4) APC 5) GLD
Charts:
Evening Headlines
Bloomberg:
- Maliki Turns to Militias to Halt al-Qaeda Onslaught. As his army flees from an al-Qaeda
splinter group, Iraqi Prime Minister Nouri al-Maliki is rallying
Shiite militias to defend his government, raising the specter of
civil war in OPEC’s second-biggest oil producer. In a televised news conference yesterday Maliki urged
citizens to take up arms after the Islamic State of Iraq and
Levant group seized control of the northern city of Mosul,
stealing weapons and helicopters from police and army bases as
Iraqi government forces fled. He vowed to build an army of
volunteers to “pull the thorns out by ourselves.”
- BOK Holds Rate as Won Near Six-Year High Poses Growth Risk.
South Korea’s central bank left its key rate unchanged, supporting
growth that faces headwinds from sluggish investment and a won near a
six-year high.The central bank held the seven-day repurchase rate at
2.5 percent for a 13th straight month, it said in a statement in Seoul
today, as forecast by all 19 economists in a Bloomberg News survey.
- Asian Stocks Retreat From Six-Year High as Kiwi Advances. Asian stocks fell, with the
regional benchmark index retreating from its highest close in six
years, after U.S. stocks dropped by the most in three weeks. New
Zealand’s dollar jumped to a three-week high after its central bank
raised interest rates. The MSCI Asia Pacific Index declined 0.5
percent by 9:52 a.m. in Tokyo after closing at the highest level since
June 9, 2008. Japan’s Topix index slid 1 percent as the yen gained
before the Bank of Japan starts a meeting today.
- Copper Falls as China Port Probe Fuels Demand Concerns. Copper declined for the sixth time
in seven sessions in New York as a Chinese probe into financing
transactions eroded demand prospects for deals using the metal
as collateral. Officials are looking at whether metals stockpiled at
Qingdao Port fell short of obligations used to secure loans, and
are focusing on Decheng Mining, said two bankers assisting the
inquiry. Analysts at Barclays Plc and Goldman Sachs Group Inc.
said the probe may curb copper inventory financing, a source of
demand. Prices also fell after the World Bank cut its estimate
for 2014 global economic growth.
Wall Street Journal:
- Iraq Signals Openness to U.S. Airstrikes Against al Qaeda, U.S. Officials Say. Iraq
has privately signaled to the Obama administration that it would allow
the U.S. to conduct airstrikes with drones or manned aircraft against al
Qaeda militant targets on Iraqi territory, senior U.S. officials said
Wednesday. The Obama administration is considering a number of options,
including the possibility of providing "kinetic support" for the Iraqi
military fighting al Qaeda rebels who seized two major...
- Activist Funds Dust Off 'Greenmail' Playbook. More companies are resorting to an old tactic to get rid of activist investors: Pay them to go away.
The practice, which involves buying back shares from activist hedge
funds, has raised concerns among some investors because it bears
similarities to "greenmail," a controversial strategy popular in the
1980s. Back then, aggressive investors such as Carl Icahn and the late
Saul Steinberg bought company shares and...
- Owners May Move Metal From China. Operators of metals warehouses in South Korea and Taiwan are
receiving inquiries about moving metal held in the Chinese port of
Qingdao to their facilities in the wake of an investigation into
potential irregularities at the port, according to people at three
warehouse companies. Metal owners are looking to shift their
stocks from China to warehouses in the region that are licensed by the
London Metal Exchange, a person at one of the warehouse companies said.
LME-licensed warehouses in Korea and Taiwan are among the...
- While Obama Fiddles. The fall of Mosul is as big as Russia's seizure of Crimea. The
fall of Mosul, Iraq, to al Qaeda terrorists this week is as big
in its implications as Russia's annexation of Crimea. But from the Obama
presidency, barely a peep. Barack Obama is fiddling while the world
burns. Iraq, Pakistan, Ukraine, Russia, Nigeria, Kenya, Syria. These foreign wildfires, with more surely to
come, will burn unabated for two years until the United States has a new
president. The one we've got can barely notice...
Fox News:
MarketWatch.com:
CNBC:
- Oil prices head higher as Iraq tensions flare. Surging U.S. oil production was expected to drive oil prices lower this
year, but a confluence of geopolitical events—particularly a Sunni
militant uprising in Iraq—could now drive already high prices even
higher and keep them there.
Zero Hedge:
Business Insider:
Reuters:
Hong Kong Standard:
- Shenzhen New-Home Sales Plunged 48.8% Y/Y in May. Used-home sales
drop 30% y/y, citing data from Chinese city's urban planning commission.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to unch. on average.
- Asia Ex-Japan Investment Grade CDS Index 104.0 +3.5 basis points.
- Asia Pacific Sovereign CDS Index 75.25 +.75 basis point.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance for May are estimated to rise +.6% versus a +.1% gain in April.
- Retail Sales Ex Auto for May are estimated to rise +.4% versus unch. in April.
- Retail Sales Ex Auto and Gas for May are estimated to rise +.4% versus a -.1% decline in April.
- The Import Price Index for May is estimated to rise +.2% versus a -.4% decline in April.
- Initial Jobless Claims are estimated to fall to 310K versus 312K the prior week.
- Continuing Claims are estimated to rise to 2605K versus 2603K prior.
10:00 am EST
- Business Inventories for April are estimated to rise +.4% versus a +.4% gain in March.
Upcoming Splits
Other Potential Market Movers
- The
Australia unemployment report, $13B 30Y T-Bond auction, Bloomberg June
US Economic Survey, Bloomberg weekly Consumer Comfort Index, weekly EIA
natural gas inventory report, (MFRM) analyst event, (CNX) analyst day
and the (BX) investor day could impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 11.80 +7.37%
- Euro/Yen Carry Return Index 144.06 -.45%
- Emerging Markets Currency Volatility(VXY) 6.59 +.76%
- S&P 500 Implied Correlation 52.10 +3.99%
- ISE Sentiment Index 99.0 -23.26%
- Total Put/Call .71 +1.43%
Credit Investor Angst:
- North American Investment Grade CDS Index 58.60 +2.10%
- European Financial Sector CDS Index 60.12 +1.05%
- Western Europe Sovereign Debt CDS Index 27.97 -1.01%
- Asia Pacific Sovereign Debt CDS Index 76.31 +2.34%
- Emerging Market CDS Index 242.58 +2.55%
- China Blended Corporate Spread Index 312.14 -.34%
- 2-Year Swap Spread 14.5 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -9.5 -2.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 221.0 +1.0 basis point
- China Import Iron Ore Spot $93.50/Metric Tonne -.11%
- Citi US Economic Surprise Index -13.0 +.2 point
- Citi Emerging Markets Economic Surprise Index -9.60 +2.3 points
- 10-Year TIPS Spread 2.20 unch.
Overseas Futures:
- Nikkei Futures: Indicating -159 open in Japan
- DAX Futures: Indicating -11 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
