Broad Equity Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 11.20 -7.13%
- Euro/Yen Carry Return Index 144.56 +.09%
- Emerging Markets Currency Volatility(VXY) 6.26 -1.88%
- S&P 500 Implied Correlation 49.26 -4.78%
- ISE Sentiment Index 135.0 +15.38%
- Total Put/Call .75 -7.41%
Credit Investor Angst:
- North American Investment Grade CDS Index 58.94 -1.68%
- European Financial Sector CDS Index 62.0 -.70%
- Western Europe Sovereign Debt CDS Index 30.54 +4.11%
- Asia Pacific Sovereign Debt CDS Index 79.90 -.12%
- Emerging Market CDS Index 248.76 -2.83%
- China Blended Corporate Spread Index 309.71 -.86%
- 2-Year Swap Spread 16.0 +1.25 basis points
- TED Spread 21.0 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -11.75 +1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .02% -1 basis point
- Yield Curve 214.0 -3.0 basis points
- China Import Iron Ore Spot $90.30/Metric Tonne +1.12%
- Citi US Economic Surprise Index -11.50 +.1 point
- Citi Emerging Markets Economic Surprise Index -9.90 -.1 point
- 10-Year TIPS Spread 2.22 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +55 open in Japan
- DAX Futures: Indicating +39 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical/retail sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Iraq Premier Says War May Spread as U.S. Weighs Action. Iraqi Prime Minister Nouri al-Maliki warned that the offensive by
Islamist militants his army is fighting could spill over into
neighboring states, as the U.S. weighed options on how to counter the
insurgents. “They will flee to you and your countries will also
be inflamed with sectarian wars,” Maliki said in a televised speech
today, without naming nations he considered at risk. His Shiite
Muslim-led government yesterday accused Saudi Arabia, the region’s
biggest Sunni power, of providing “moral and material support” for the
Islamic State in Iraq and the Levant, the group that began its assault
by sweeping into Mosul last week.
- ISIL Battles Elite Iraq Troops for Nation’s Biggest Refinery. Islamist insurgents battled Iraqi forces for control of the nation’s
largest oil refinery. Local police said militants are inside the plant,
while the central government said its elite troops are in control. Army
helicopters struck fighters from the Islamic State in Iraq and the
Levant near Baiji after militants seized the 310,000 barrels-a-day
refinery, according to a statement from the Salahudin provincial police.
ISIL fighters are still inside the facility and the battle continues,
it said. Iraq’s troops killed 40 militants and repelled their attack,
military spokesman Qassim Ata said in a televised news conference.
- $120 Oil Flagged as Danger Point for Global Economy on Iraq Crisis. The global economy faces a new threat from an old enemy: oil.
A
spike in the price of crude foreshadowed economic slumps in each of the
last four decades and economists are worrying anew after Brent touched
its highest price in nine months above $113 a barrel amid fresh violence
in Iraq, OPEC’s second biggest producer. Brent started the year about
$6 cheaper.
- China Auditor Blames CIC Mismanagement for Investment Losses. Mismanagement
at China Investment Corp., the nation’s $575 billion sovereign wealth
fund, led to overseas investment losses that could widen, according to
the National Audit Office. A dereliction of duty by managers, and
inadequate due diligence and post-investment management were identified
in 12 investments made abroad by the fund between 2008 and 2013,
according to results of an audit conducted last year, that didn’t
identify the individual cases.
- World Cup Pushes Brazilian Inflation Above Analyst Forecasts. Brazil’s consumer prices in the month through mid-June rose
more than economists forecast, as the World Cup boosted prices for
flights, hotels and tours. Inflation as measured by the benchmark
IPCA-15 index decelerated to 0.47 percent from 0.58 percent the prior
month, the national statistics agency said on its website today. That
was faster than the 0.42 percent median estimate from 38 analysts
surveyed by Bloomberg.
- Homebuilders See Record Bearish Bets on Shaky Recovery. Someone thinks the housing rebound is built on shaky foundations. A
record 180,000 puts traded on the SPDR S&P Homebuilders (XHB)
exchange-traded fund on June 11, according to data compiled by
Bloomberg. The contract with the highest ownership pays off in
the event of a 20 percent slump by December in the ETF tracking
stocks from DR Horton Inc. to Williams-Sonoma Inc.
Wall Street Journal
- Obama's Job-Approval Rating Takes a Hit. A
new Wall Street Journal/NBC News poll finds President Barack Obama’s
job-approval rating at 41%, which matches a previous low. Approval of
his handling of foreign
policy hit a new low of 37%.
CNBC:
ZeroHedge:
Business Insider:
Freemaninrealworld:
Mysteel.com:
- Daily Crude Steel Output by China Key Cos. Hits Record. Crude
steel output by large Chinese steel makers averaged 1.83m tons a day in
the first 10 days of this month, hitting a record, citing data from the
China Iron and Steel Association.
Xinhua:
- Audits
Find Irregularities in 3 Major Chinese Financial Institutions.
Irregularities have been revealed in the operation and management of
three major financial institutions in China, according to the country's
top auditing body on Wednesday. China Investment Corp, Agricultural
Development Bank of China and Bank of China have been found violating
regulations in issuing loans and their financial management described as
"chaotic," the National Audit Office said in a statement. The
institutions had either issued loans to projects which failed to go
through a whole set of approval procedures or meet funding adequacy
requirements, or offered loans to companies without going through
required procedures.
Style Outperformer:
Sector Outperformers:
- 1) Utilities +.98% 2) Gold & Silver +.86% 3) Steel +.85%
Stocks Rising on Unusual Volume:
- INSM, APD, ACOR, NMBL, ADBE, GLNG, FDX, CALL and RCPT
Stocks With Unusual Call Option Activity:
- 1) FDX 2) HTZ 3) ADSK 4) CAG 5) MNST
Stocks With Most Positive News Mentions:
- 1) FDX 2) ICE 3) PX 4) BBRY 5) TSN
Charts:
Evening Headlines
Bloomberg:
- Gunmen Attack North of Baghdad. Islamist
militants in Iraq fought with the army in a town near Baghdad and with
Kurds in the oil-rich province of Kirkuk, as the U.S. weighed options to
stem an offensive that threatens to fracture the country. Gunmen from
the Islamic State in Iraq and the Levant attacked Kurdish forces in
Kirkuk yesterday, leaving two soldiers and a civilian dead and almost 50
people injured, al-Mada news agency said. An earlier attack left five police dead, while ISIL also regained
control of the mostly Turkmen village of Bashir south of Kirkuk,
al-Mada said.
- Japan’s Exports Decline in May on Weak U.S., Asian Demand.
Japan’s exports fell in May for the first time in 15 months on weak
demand from the U.S. and Asia, adding to challenges for Prime Minister
Shinzo Abe as he tries to steer the economy through a forecast
contraction this quarter. Outbound shipments decreased 2.7 percent
from a year earlier, the finance ministry said in Tokyo today, steeper
than a median forecast for a 1.3 percent decline in a Bloomberg News
survey of 29 economists. Imports dropped 3.6 percent, with the trade
deficit narrowing to 909 billion yen ($8.9 billion). Slowing demand
from the U.S. and China - Japan’s two biggest export destinations --
threatens to weigh on shipments, which are losing impetus as the yen’s
slide against the
dollar stalls.
- China Blocks European Shipping Pact, Sending Maersk Down. China
blocked the formation of a global alliance by the world’s three biggest
shipping lines in a surprise move that ignored Western approval of the
plan and sent A.P. Moeller-Maersk A/S (MAERSKB) shares tumbling the most
in two years.
- Most Asia Stocks Rise Before Fed Policy Meeting Concludes.
Most Asian stocks rose, led by health-care shares, ahead of a Federal
Reserve monetary policy decision today. Energy producers declined.
Tsuruha Holdings Inc. surged 7.1 percent in Tokyo after the drugstore
operator forecast profit will gain 14 percent. Aquila Resources Ltd.
climbed 7 percent in Sydney after the coal producer recommended a
takeover offer from China’s Baosteel Group Corp. and Australia’s Aurizon
Holdings Ltd. Woodside Petroleum Ltd. led energy firms lower, falling
3.6 percent, after Royal Dutch Shell Plc sold most of its stake in
Australia’s second-largest energy producer. The MSCI Asia Pacific
Index was little changed at 143.51 as of 9:27 a.m. in Tokyo, as three
shares gained for every two that fell before markets open in China and
Hong Kong.
- Brent Above $113 as U.S. Weighs Military Options in Iraq.
Brent for August settlement added 51 cents, or 0.5 percent,
to $113.45 a barrel on the ICE Futures Europe exchange, the
highest closing price for a front-month contract since Sept. 9.
The volume of all futures traded was 17 percent above the 100-day average for the time of day.
Wall Street Journal:
- U.S. Rules Out Iraq Airstrikes for Now. President Barack Obama Is Opting to Pursue Alternate Strategies. President Barack Obama decided against immediate air strikes on
marauding Sunni extremists in Iraq, opting instead to pursue strategies
such as providing intelligence to the Iraqi military, addressing the
country's political divisions and seeking support from regional allies. Mr.
Obama will convene a White House meeting Wednesday with Republican and
Democratic leaders from the House and Senate to brief them on what...
- China Shows Regulatory Heft by Sinking Shipping Deal. Beijing Blocks European Freight Alliance Out of Concern Over Pricing. China is flexing its growing power over global deals, after it put
the kibosh on a shipping alliance that officials here said would hold
too much sway over trade lanes to Europe. Tuesday's decision by
China's Ministry of Commerce came despite approvals for the shipping
alliance in Europe and the U.S. It marks only the second time the
Chinese regulator has stepped in to block a corporate combination since
the country enacted...
- Pro-Russia Militia in Ukraine Seeks Urgent Help from Moscow. The Kremlin Hasn't Responded to the Request That Comes as Ukrainian Forces Retake Borders Areas. A Kiev offensive to retake control of restive areas along the
country's eastern border has accelerated in recent days, prompting
leaders of an armed pro-Russia uprising to appeal to Moscow for urgent
military help on Tuesday. Ukrainian government troops have
advanced from the north and south in a bid to cut off the fighters and
weapons that Kiev says are flowing over its border from Russia. So far,
though, Moscow has given little...
- The Collapsing Obama Doctrine. Rarely has a U.S. president been so wrong about so much at the expense of so many. As the terrorists of the Islamic State of Iraq and Syria (ISIS) threaten
Baghdad, thousands of slaughtered Iraqis in their wake, it is worth
recalling a few of President
Obama's
past statements about ISIS and al Qaeda. "If a J.V. team puts on
Lakers' uniforms that doesn't make them Kobe Bryant" (January 2014).
"[C]ore al Qaeda is on its heels, has been decimated" (August 2013).
"So, let there be no doubt: The tide of war is receding" (September
2011).
Fox News:
- Clinton claims she had doubts about video explanation after Benghazi strike.
Hillary Clinton, in a sit-down interview with Fox News, suggested
Tuesday that she had doubts from the outset about whether the Benghazi
terror attack was triggered by a protest over an anti-Islam film --
though her State Department ended up pushing that narrative for days.
"This was the fog of war," Clinton said, when asked about the
administration's controversial public explanation of the attack. "My own
assessment careened from the video had something to do with
it, the video had nothing to do with it -- it may have affected some
people, it didn't affect other people," she said in the interview with
Fox News' Bret Baier and Greta Van Susteren. Clinton added: "There's no doubt terrorists were involved."
MarketWatch.com:
CNBC:
- Fed pouring fire on glowing embers of inflation: Grant. In
an interview with "Closing Bell," Grant said the Fed's monetary policy
has led to an inflation of asset values, will likely lead to a measured
rate of consumer price inflation
and will certainly lead to "financial turmoil." If that turmoil is
severe enough, he thinks it could introduce another risk of deflation.
Zero Hedge:
ValueWalk:
Business Insider:
Reuters:
- Adobe results beat estimates on strong subscription growth.
Adobe Systems Inc, the maker of Photoshop and Acrobat software,
reported better-than-expected quarterly profit and revenue, helped by
higher subscription sales of its Creative Cloud and Marketing Cloud
suites. Adobe's shares rose 8.6 percent in after-hours trading.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.50 +1.5 basis points.
- Asia Pacific Sovereign CDS Index 78.0 +.5 basis point.
- NASDAQ 100 futures +.11%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Current Account Deficit for 1Q is estimated at -97.0B versus -81.1B in 4Q.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-575,000 barrels versus a -2,596,000 barrel decline the pior week.
Gasoline supplies are estimated to fall by -387,500 barrels versus a
+1,697,000 barrel gain the prior week. Distillate supplies are estimated
to fall by -37,500 barrels versus a +860,000 barrel gain the prior
week. Finally, Refinery Utilization is estimated to rise +.7% versus a
-2.9% decline the prior week.
2:00 pm EST
- The FOMC is expected to keep the benchmark Fed Funds Rate at .25%.
- The Fed's pace of QE3 is estimated to fall to $35B in June versus $45B prior.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen speaking, BoE minutes, weekly MBA mortgage applications
report, Jefferies Consumer Conference, (AMZN) product launch and the
Keystone Pipeline Senate Committee vote could impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate and technology
shares in the region. I expect US stocks to open modestly higher
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: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.20 -3.56%
- Euro/Yen Carry Return Index 144.43 +.11%
- Emerging Markets Currency Volatility(VXY) 6.33 +4.11%
- S&P 500 Implied Correlation 51.25 -3.66%
- ISE Sentiment Index 119.0 +56.58%
- Total Put/Call .80 +15.94%
Credit Investor Angst:
- North American Investment Grade CDS Index 59.99 -.53%
- European Financial Sector CDS Index 62.44 +.26%
- Western Europe Sovereign Debt CDS Index 30.21 +3.65%
- Asia Pacific Sovereign Debt CDS Index 79.22 +2.09%
- Emerging Market CDS Index 256.44 +.99%
- China Blended Corporate Spread Index 312.41 +.56%
- 2-Year Swap Spread 14.75 -.25 basis point
- TED Spread 20.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -13.0 +2.0 basis points
Economic Gauges:
- 3-Month T-Bill Yield .03% unch.
- Yield Curve 217.0 +3.0 basis points
- China Import Iron Ore Spot $89.30/Metric Tonne +.34%
- Citi US Economic Surprise Index -11.60 +3.8 points
- Citi Emerging Markets Economic Surprise Index -9.80 -3.1 points
- 10-Year TIPS Spread 2.21 +3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +48 open in Japan
- DAX Futures: Indicating +13 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/medical/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Energy -.91% 2) Coal -.54% 3) Defense -.30%
Stocks Falling on Unusual Volume:
- QIWI, DOM, CBI, REI, ACOR, BT, KFY, MRTN, ACMP, PGEM, KORS, IPCM, WPZ, SAIA, WSTC, CUB, BMA, SHPG, E, SGEN, DPZ, UTHR, ENV, OPHT, BHP and ZOES
Stocks With Unusual Put Option Activity:
- 1) NUAN 2) FIO 3) GT 4) IYR 5) DXJ
Stocks With Most Negative News Mentions:
- 1) GM 2) BSX 3) DPZ 4) BAH 5) AVAV
Charts: