Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.50 +.5 basis point.
- Asia Pacific Sovereign CDS Index 71.5 +.75 basis point.
- NASDAQ 100 futures -.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (FAST)/.44
- (WFC)/1.01
- (INFY)/46.44
Economic Releases
2:00 pm EST
- The Monthly Budget Statement for June is estimated at $79.0B.
Upcoming Splits
Other Potential Market Movers
- The Fed's Evans speaking, Fed's Plosser speaking, USDA WASDE report and Canadian unemployment report 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 lower
and to rally into the afternoon, finishing mixed. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 12.43 +6.70%
- Euro/Yen Carry Return Index 143.84 -.64%
- Emerging Markets Currency Volatility(VXY) 5.89 +1.20%
- S&P 500 Implied Correlation 50.81 +3.74%
- ISE Sentiment Index 124.0 +12.73%
- Total Put/Call 1.06 +26.19%
Credit Investor Angst:
- North American Investment Grade CDS Index 58.05 +1.70%
- European Financial Sector CDS Index 71.57 +3.36%
- Western Europe Sovereign Debt CDS Index 36.40 +4.0%
- Asia Pacific Sovereign Debt CDS Index 71.47 +1.02%
- Emerging Market CDS Index 226.76 +3.30%
- China Blended Corporate Spread Index 300.05 -.40%
- 2-Year Swap Spread 16.75 +2.25 basis points
- TED Spread 21.75 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -11.75 unch.
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 208.0 +3.0 basis points
- China Import Iron Ore Spot $96.90/Metric Tonne +.31%
- Citi US Economic Surprise Index -12.60 +1.4 points
- Citi Emerging Markets Economic Surprise Index -6.0 -1.4 points
- 10-Year TIPS Spread 2.27 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -140 open in Japan
- DAX Futures: Indicating +21 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/retail sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Israel Mobilizes 20,000 Troops for Possible Gaza Invasion.
Israel is mobilizing 20,000 soldiers for a possible ground invasion of
the Gaza Strip to halt rocket bombardments on its south, as regional and
world leaders appealed for an end to the violence. The Palestinian
death toll from three days of stepped-up Israeli air strikes climbed
past 80. “Where
is this leading, is it leading to a ground force incursion? I can’t
confirm that,” Israel army spokesman Lieutenant-Colonel Peter Lerner
said today in a phone briefing. “I can confirm we are making all the
necessary preparations to be ready for that.” Earlier this week, the
military was authorized to call up as many as 40,000 reserve troops.
- IMF Says Spain Needs to Raise Taxes After Election-Year Cuts. Spanish
Prime Minister Mariano Rajoy will have to take action to increase
government revenue to compensate for the cost of tax cuts announced last
month, the International Monetary Fund said. “What we’ve seen so
far is revenue losing,” James Daniel, head of the IMF’s Spain mission,
said during a telephone conference from Washington today. “That will
need to be compensated by further measures in the future.”
- VIX Jumps as Portugal Bank Concern Fuels Stock Losses. A measure of European stock-market
volatility rose the most in four months and the U.S. VIX jumped as concern over Portugal’s banks spurred a rout in equities. Europe’s
VStoxx Index increased 12 percent to 16.85 as of 3:27 p.m. in London,
heading for the biggest advance since March. The Chicago Board Options
Exchange Volatility Index climbed 7.8 percent to 12.56. The gauges track the cost of options and are considered measures of investor fear. Both are up more than 22 percent this week.
“This could just be a catalyst for a market correction,” Andrew
Wilkinson, chief market analyst at Interactive Brokers LLC, said in a
phone interview from Greenwich, Connecticut. “You’d have to see a
sustained period of selling, back-to-back losses of 1 to 1.5 percent
into next week, before people will
start piling on the protection.”
- French Stocks Seen Extending Losses on Economy Concern. Options traders are betting declines
in French stocks aren’t over as concern grows that President Francois Hollande will fail to revive the economy. Bearish
contracts on the benchmark CAC 40 Index (CAC) cost the most since April
2013 relative to those on the Euro Stoxx 50 Index, data compiled by Bloomberg show. Puts protecting against a 3.7 percent decline in the gauge are the most owned. French
shares have fallen 6.2 percent to their lowest level since March
from their high last month, compared with the 4.6 percent
decline for the euro-area index.Germany Expels U.S. Intelligence Envoy Amid Spying Spat
- Germany Expels U.S. Intelligence Envoy Amid Spying Spat. German
Chancellor Angela Merkel’s government expelled the top U.S.
intelligence official in Berlin over allegations of espionage,
escalating a conflict that one of her aides said has caused “grave”
political harm. The U.S. embassy
official was asked to leave Germany after the Federal Prosecutor began
investigating spying practices, according to the statement from Merkel’s
Chancellery today.
- Greece Cites Market Conditions as Bond Sale Misses Target. Portugal’s bonds led a selloff in securities from the
region’s so-called periphery nations this week on instability in
that nation’s banks. Greece’s transaction went ahead “despite
very unfavorable conditions in international markets and
especially in periphery, today and yesterday,” the Finance Ministry in Athens said in a statement. “It points at a fragile position of the issuer in terms of being able to secure a reliable market access,”
said Gianluca Ziglio, executive director of fixed-income research at
Sunrise Brokers LLP in London. Greece had to “accept halving its initial
issuance target despite being a syndicated offer, and
also had to accept a higher guidance than was initially
thought,” he said.
- European Stocks Drop as Portugal, Italy Banks Fall.
European stocks fell for a fifth day as a gauge of lenders declined to
its lowest level this year and equities in the so-called peripheral
nations tumbled. Banks in Portugal, Italy and Spain sank, sending an
industry gauge to the fourth slump in five days. Fugro NV plunged the
most since 2003 after predicting a drop in profit margin and a write-off
of as much as 350 million euros ($477 million). Gerresheimer AG and
Tryg A/S climbed after posting quarterly
earnings that exceeded analysts’ estimates. The Stoxx Europe 600
Index fell 1.1 percent to 336.37 at the close of trading in London,
extending its five-day decline to 3.6 percent, the most since March.
Investors are weighing valuations near the highest levels since 2009,
while concern is rising over signs that the euro-area recovery remains
fragile. “We’ve seen a lot of money go into the periphery
earlier this year, and banks have a fairly big weighting in those
regions,” said Veronika Pechlaner, who helps oversee $2.3 billion at
Jersey, Channel Islands-based Ashburton Ltd. “As investors revisit
their positions, sentiment can turn quite quickly. A gauge of lenders
in the region sank 1.7 percent, falling the second most among 19
industry groups. Banco Espirito Santo SA plunged 17 percent to
50.9 euro cents before the Portuguese securities regulator suspended
the shares.
- Gold Reaches 16-Week High as Portugal Spur Haven Buying.
On the Comex, gold futures for August delivery rose 1.1 percent to
$1,338.80 an ounce at 12:02 p.m. in New York, after touching $1,346.80,
the highest for a most-active contract since March 19. Trading was 50
percent higher than the 100-day average
for this time, according to data compiled by Bloomberg.
- China’s Copper Imports Fall as Financing Deals Unwind. China’s copper imports dropped to the lowest since April last year as demand for the metal as collateral to obtain credit eased amid a probe at Qingdao Port. Inbound shipments of unwrought copper and copper products fell to 350,000 tons in June, a 7.9 percent decline from the previous month, according to data released by customs today. Weaker demand from China, the world’s biggest user, may weigh on benchmark copper futures in London, which have retreated 3.3 percent this year. Prices will slide during the
next six to 12 months as production costs drop, China’s property
sector weakens and commodity financing unwinds following the
investigation at Qingdao, Goldman Sachs Group Inc. said July 8.
- Chicago Fed Calls for Curbs on High-Frequency Trading.
The Federal Reserve Bank of Chicago entered the debate over whether
financial markets are fair, proposing limits on high-frequency trading
firms and incentives to bring more buying and selling into public view.
Wall Street Journal:
CNBC:
ZeroHedge:
Business Insider:
Reuters:
- Carbon import tariffs could torpedo global climate deal- EU official. A move by the European Union to impose duties on carbon-intensive imports would
scupper the chances of striking a global agreement to tackle climate change next
year, the bloc's top climate official said on Thursday. European leaders have agreed to decide by October whether to set a 2030 goal
to cut carbon emissions as the EU contribution to a global pact to tackle
climate change, due to be signed in Paris in late 2015 and take effect from
2020.
Style Underperformer:
Sector Underperformers:
- 1) Oil Service -1.40% 2) I-Banking -1.31% 3) Retail -1.22%
Stocks Falling on Unusual Volume:
- EROS, MEMP, MIC, SRPT, LL, PBPB, TTS, CBS, TSCO, SYT, SIR, GOV, CUK, MHK, NTI, FOXF, WDFC, TREX, PRSC, NTT, STCK, PHG, CSTE, DEST, CNS, TROW, TSRO, GEOS, NDLS and LQDT
Stocks With Unusual Put Option Activity:
- 1) CIEN 2) XLB 3) XLF 4) HD 5) EWT
Stocks With Most Negative News Mentions:
- 1) LL 2) BAC 3) HOG 4) HD 5) XOM
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Computer Hardware +1.27% 2) Gold & Silver +1.09% 3) Airlines +.78%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) LNG 2) RDN 3) SRPT 4) LL 5) GPRO
Stocks With Most Positive News Mentions:
- 1) LMT 2) AA 3) BA 4) BBRY 5) GOOG
Charts:
Evening Headlines
Bloomberg:
- Gaza Rockets Threaten Nuclear Plant as Israel Vows Force. Palestinian militants extended their
rocket barrage against Israel to threaten its Dimona nuclear
plant as Prime Minister Benjamin Netanyahu promised to ratchet up the military assault on Hamas in the Gaza Strip.
The Palestinian death toll neared 70 since July 8 from Israeli air
raids and a firefight with Palestinian commandos who infiltrated across
Gaza’s border through the Mediterranean Sea.Netanyahu hinted at a
possibleground incursion to stop the hail
of more than 300 rockets from the coastal territory.
- Ukraine Pushes Offensive as Russia Says Rebels Seek Talks. Ukrainian
President Petro Poroshenko
dismissed Russia’s claim that rebels want peace talks as he pressed on
with an offensive to regain territory near the frontier, where
skirmishes have left hundreds dead. Poroshenko toldFrench President Francois Hollande and
German Chancellor Angela Merkel in a joint phone call yesterday
that Ukraine is ready for dialogue with pro-Russian separatists
and international observers but “the other side” has shown no
willingness, according to his website. Russian Foreign Minister
Sergei Lavrov said earlier the militias in eastern Ukraine are
ready for talks, but “ultimatums and pre-conditions” must not
stand in the way of peace efforts.
- Asia Stocks Rise Before China Data as Oil Slumps 10th Day. Asian stocks climbed before Chinese
trade data, while the U.S. oil benchmark-contract slipped toward
its longest-ever stretch of declines amid rising supplies and
sagging consumption. Indonesia’s rupiah jumped. The MSCI Asia Pacific Index gained 0.1 percent by 10:36 a.m. in Tokyo after dropping by the most in two months yesterday. West Texas Intermediate crude for August delivery
lost 0.3 percent to $102.02 a barrel, its 10th declining day and
the longest slump since trading began in 1983. Japan’s Topix
index fell 0.3 percent after the biggest-ever drop in machinery
orders.
- Fed’s Bullard Says Unemployment Drop to Push Inflation.
Federal Reserve Bank of St. Louis
President James Bullard said a surprisingly fast drop in unemployment
will fuel inflation, bolstering his case for an interest-rate increase
early next year. “I think we are going to overshoot here on inflation,”
Bullard said today in a telephone interview from St. Louis. He
predicted an inflation rate of 2.4 percent at the end of 2015,
“well above” the Fed’s 2 percent target.
- Fed Moves Closer to Choosing Main Stimulus-Exit Tool. Federal
Reserve officials moved closer to deciding on the main tool they will
use to tighten monetary policy when the time comes, most likely next
year. Most participants at the Federal Open Market Committee’s June
meeting agreed that the interest rate on excess reserves banks keep on
deposit at the Fed “should play a central role” in the exit from
extraordinary monetary stimulus, according to minutes released today in
Washington. Another tool, known as the overnight reverse repurchase
facility, “could play a useful supporting role,” according to
the minutes. The tool could be used to set the lowest rate at
which holders of cash would be willing to lend.
Wall Street Journal:
- Gaza Rockets Reaching Deeper Into Israel. Airstrikes on Palestinian Territory Aim to Degrade Hamas's Arsenal. Over the past two days, Gaza militants have sent rockets deeper into
Israel than ever before, raising the stakes of Israel's own air campaign
against the territory's Hamas leadership. Israel launched its
most aggressive airstrikes in 20 months on Tuesday, attacking at least
486 targets over the past two days in an effort to degrade Hamas's
arsenal, the military said. Palestinians have fired recently acquired...
- Companies Selling Stocks at Record Pace This Year. Offerings of Stock and Similar Securities Have Raised $510 Billion in 2014 Around the World. Companies world-wide are selling stocks at a record pace,
capitalizing on investors' appetite for riskier assets at a time of low
returns on safer bets. Offerings of stock and stock-linked
securities have raised $510.1 billion in 2014 through Tuesday, according
to data provider Dealogic. That beats out the previous record for that
time period, $498.9 billion in 2007. While many deals still originate with growing companies...
- The Fundraiser in Chief. Since taking office, President Obama has attended almost 400 events to hit up donors. As de facto party leader, presidents raise political money. Since he
makes time for it no matter how pressing world or national affairs are,
President Obama apparently likes raising campaign funds. He has attended
34 fundraisers so far this year. What is unusual is how much time he
devotes to it, his timing and his lack of judgment. For example, the afternoon following the Sept. 11, 2012, murder of Ambassador Christopher Stevens in...
Fox News:
MarketWatch.com:
CNBC:
- Holder won't meet with BofA CEO as mortgage talks stall. U.S.
Attorney General Eric Holder has formally refused to meet with Bank of
America Chief Executive Brian Moynihan to hammer out a
multibillion-dollar deal, as talks to resolve probes into shoddy
mortgage securities sold by
the bank and its units remain at a standstill, according to people
familiar with the matter.
Zero Hedge:
Business Insider:
Reuters:
Financial Review:
- Keeping watch for the next subprime timebomb. Fears
are growing of another subprime crisis, but this time it won’t be
because of mortgage-backed securities. Rather, junk bonds and high-risk
government debt might be the culprits.
Evening Recommendations
Night Trading
- Asian equity indices are unch. to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.0 +.5 basis point.
- Asia Pacific Sovereign CDS Index 70.75 unch.
- NASDAQ 100 futures -.08%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated at 315K versus 315K the prior week.
- Continuing Claims are estimated to fall to 2565K versus 2579K prior.
10:00 am EST
- Wholesale Inventories for May are estimated to rise +.6% versus a +1.1% gain in April.
- Wholesale Sales for May are estimated to rise +.9% versus a +1.3% gain in April.
Upcoming Splits
Other Potential Market Movers
- The
Fed's George speaking, 30Y $13B T-Bond auction, weekly EIA natural gas
inventory report, Bloomberg July US Economic Survey, weekly Bloomberg
Consumer Comfort Index and the (CVX) earnings update could impact
trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer 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.