Style Underperformer:
Sector Underperformers:
- 1) Biotech -1.08% 2) Banks -.61% 3) Restaurants -.60%
Stocks Falling on Unusual Volume:
- ININ, FOX, IMAX, FOXA, LCI, HSY, TSM, COV, YHOO, ALB, BBRY, SHPG, LGND, RDN, PNC, MRTN, ROST, ASML, FL, LJPC, MDT, ADMS, TJX, CAB, AKRX, AXDX and YHOO
Stocks With Unusual Put Option Activity:
- 1) YUM 2) SNDK 3) BHI 4) CSX 5) M
Stocks With Most Negative News Mentions:
- 1) MILL 2) ROST 3) POT 4) NSM 5) BGC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +1.90% 2) Steel +1.39% 3) Computer Services +1.36%
Stocks Rising on Unusual Volume:
- IGT, TWX, JOY, TSEM, MLNX, HCA, INTC, VIAB, DISCA, UHS, CYH, THC, AIR, CLF, KEYW, CSH, PRAA and IMGN
Stocks With Unusual Call Option Activity:
- 1) PFE 2) HCA 3) FTNT 4) TWX 5) CHRW
Stocks With Most Positive News Mentions:
- 1) INTC 2) HCA 3) IBM 4) CVX 5) KORS
Charts:
Evening Headlines
Bloomberg:
- Saudis on Alert at Iraq Border for Conflict Spillover. Saudi
Arabia is deploying men and high-tech machinery to boost vigilance
along its 800 kilometer (500-mile) northern border with Iraq, where it
faces security threats from both sides in a deepening sectarian conflict. The National Guard and the Ministry of Defense sent an extra 1,000 men each, while border patrols have been increased
and helicopters deployed to the area, General Faleh al-Subaie,
commander of the Saudi Border Guard in the north, said in the
city of Arar. That’s the command post for the Arar crossing
station, about 60 kilometers away, where fences and 7 meter-high
sand berms separate OPEC’s two largest oil producers.
- Iran Nuclear Deal Falters as Contingency Plans Considered. The top diplomats from the U.S. and
Iran said progress in nuclear negotiations may not be enough to
meet a July 20 deadline for clinching a long-term accord. U.S. Secretary of State John Kerry flew back to Washington
after failing to reach a breakthrough with his Iranian
counterpart, Mohammad Javad Zarif. Iran’s foreign minister is
staying on in Vienna in an attempt to bridge the gaps to an
agreement over the next five days.
- EU Leaders Weigh Sanctions Against Russia Over Ukraine. European Union leaders meeting in
Brussels will consider expanded sanctions against Russia over
the Ukraine conflict, as the U.S. urges the bloc to take a tougher stand against Moscow.
German Chancellor Angela Merkel said the question of possibly stronger
penalties against Russia is on the agenda for an EU summit today. “We
haven’t spoken with every member state,” she told
reporters after a meeting in the Croatian city of Dubrovnik
yesterday, adding that she didn’t want to ‘‘pre-empt the
results.’’
- Shadow-Banking Curb Fuels Loan-Backed Debt Spree: China Credit. Chinese banks’ sales of bonds backed
by loans have surged 22-fold this year as the government seeks
to curb shadow banking, while still allowing lenders to make room on their balance sheets for new financing. Banks have issued 78.7 billion yuan ($12.7 billion) of such securities, compared with 3.6 billionyuan in the same period
last year and 15.8 billion yuan for all of 2013, Bloomberg-compiled data show. Such transactions must get approval from
regulators and are more transparent than wealth-management
products and trusts, which have been used by banks to bypass
capital controls.
- BRICS Agree on $50 Billion Bank With Something for Everyone. Leaders
of the five BRICS nations agreed on the structure of a $50 billion
development bank by granting China its headquarters and India its first
rotating presidency. Brazil, Russia and South Africa were also granted posts or units in the new bank.
- Asian Stocks Swing From Gain to Loss.
Asian stocks swung between gains and losses after the Federal Reserve
said some sectors of the U.S. equity market have excessive valuations
and banks reported better-than-estimated earnings. Iluka Resources Ltd.
led materials shares higher, climbing 2.3 percent in Sydney, after the
world’s biggest zircon producer reported production of the mineral
topped estimates. Rio Tinto Group gained 1.3 percent after iron-ore
output surged in the second quarter. Yahoo Japan Corp. slipped 1.8
percent in Tokyo, leading a retreat among technology shares. The MSCI Asia Pacific Index was little changed at 147.08 as of 9:20 a.m. in Tokyo, before markets open in Hong Kong and China.
- Goldman(GS) Sees Lower Commodity Prices Over Five Years on Supplies. Commodities
from iron ore to copper and Brent crude are expected to drop over the
next five years as global supplies increase, according to Goldman Sachs
Group Inc. There will be substantial declines in some metals, energy
and bulk commodities, analysts including Chief Currency Strategist
Robin Brooks wrote in a report. The period of
continued year-on-year price rises for most commodities is over,
they said in the report, which was dated yesterday.
- Rio Says Iron Ore Output Rose 11% on Australia Expansion. Rio
Tinto Group (RIO), the world’s second-largest mining company, said
second-quarter iron-ore production increased 11 percent after expanding
operations in the remote Pilbara region of Western Australia. Output was 57.5 million metric tons in the three months to June 30, from 51.8 million tons a year earlier, London-based Rio
said today in a statement. That’s in line with the 57.7 million-ton median estimate of seven analysts surveyed by Bloomberg. The
company raised its full-year copper guidance.
- Yellen Sees Risk of Bubbles in Leveraged Loan Market. Federal
Reserve Chair Janet Yellen warned she sees signs of asset price bubbles
forming in some markets such as those for leveraged loans and
lower-rated corporate debt, while indicating stocks aren’t overvalued. “We’re seeing a deterioration in lending standards, and we
are attentive to risks that can develop in this environment” of
low interest rates, Yellen said today in semi-annual testimony
to the Senate Banking Committee.
Wall Street Journal:
- Israel Warns Gazans of New Attack After Hamas Rejects Truce. First Israeli Killed by a Rocket From Gaza. Israel threatened to broaden its offensive
against Hamas after the Islamists rejected a truce, and the army warned
tens of thousands of Palestinians in northern Gaza to clear out by
Wednesday morning. Despite the continued
fighting, the White House called a cease-fire proposed by Egypt on
Monday a "live option" and urged Hamas to accept the terms and stop
firing rockets from Gaza into Israel.
- Russia, Ukraine Beef Up Accusations. War of Words Spark Speculation About Military Escalation. Russia and Ukraine moved on Tuesday to bolster accusations against
each other of cross-border attacks, stepping up a war of disputed facts
that has accompanied the bloody separatist conflict in Ukraine's east. Russia's
Ministry of Defense brought 11 foreign military attachés, including one
from the U.S., to a neighborhood on the Russian side of the border
where Moscow accused Kiev's forces of shelling a residential house on...
- Fed's Yellen Hedges Her View on Rates. Easy-Money Policies Appropriate, but Sooner Hike Than Expected Is Possible if Job Market Quickly Improves. Federal Reserve Chairwoman Janet Yellen defended keeping interest
rates low before Congress on Tuesday, but opened the door a crack to
earlier-than-planned rate hikes if the labor market continues its
surprising improvement. "If the labor market continues to improve
more quickly than anticipated by the [Fed]," she told the Senate
Banking Committee, "then increases in the federal-funds rate target
likely would occur...
- Obama Administration Urges Immediate Action on 'Inversions'. Jacob Lew Says Lawmakers Should Enact Legislation to Shut Down 'Abuse'. The Obama administration joined the growing debate over U.S.
companies reincorporating overseas for tax purposes, urging lawmakers to
pass legislation to limit the moves. In a letter to leaders of
the congressional tax-writing committees, Treasury Secretary Jacob Lew
said lawmakers "should enact legislation immediately…to shut down this
abuse of our tax system." The letter was reviewed by The Wall Street
Journal on Tuesday...
Fox News:
CNBC:
- Intel(INTC) earnings beat estimates, shares jump. Intel shares rallied after the firm reported quarterly earnings and
revenue that beat analysts' expectations on Tuesday, citing
stronger-than-expected demand for corporate PCs.
After the earnings announcement, the company's shares rose more than 4 percent in extended-hours trading.
- Yahoo(YHOO) sales guidance misses estimates, shares wobble.
Yahoo posted quarterly earnings and revenue that missed Wall Street
expectations Tuesday and also handed in current-quarter sales guidance
that fell short of estimates. But shares still poked higher in
extended-hours trading after the firm said it won't have to sell as much
of its Alibaba stake. Yahoo shares fell nearly 2 percent in extended hours trading.
Zero Hedge:
Business Insider:
Reuters:
- Chinese property developers at risk as trust funds dry up. China's shadow banking firms
slashed lending to property developers in the first half of this
year, closing off a crucial funding avenue just as the housing
market cools, potentially spelling trouble for the sector and
the broader economy.
Trust companies, which pool money from rich people and
companies to make high-interest loans and are part of the
China's vast and opaque shadow banking system, were a ready
source of cash during the housing boom, particularly for smaller
developers that had trouble borrowing from banks.
- Hershey(HSY) increases prices as costs rise. Hershey Co, the No. 1 candy
producer in the United States, said it would increase prices of
its instant consumable, multi-pack, packaged candy and grocery
lines by 8 percent to tackle rising commodity costs.
- Italy's GTECH to buy gaming company IGT for $6.4 bln including debt.
Italy's GTECH SpA will buy International Game Technology in a
cash-and-stock deal valued at $6.4 billion, including net debt, the
companies said on Wednesday. GTECH will pay $4.7 billion in cash and
stock and the
assumption of $1.7 billion in net debt, the companies said in a
statement.
Telegraph:
- Global equity melt-up in full swing even if investors hate themselves. (graph) So in a sense, the equity rally is a function of the collective acts
of monetary authorities pushing investors into stocks. This of course is
why the BIS is in despair. “Overall, it is hard to avoid the sense of a
puzzling disconnect between the markets’ buoyancy and underlying
economic developments globally,” it said. Just wait until the Fed tightens in earnest.
Yonhap News:
Shanghai Securities News:
- China's Economy Risks Entering Deflation. China's economy risks
entering deflation and liquidity trap and should have relatively loose
monetary policy, Fan Jianjun, a researcher at the Development Research
Center under the State Council, writes.
China Securities Journal:
- China Unlikely to Cut Interest Rates This Year. Possibility isn't
big that China will have interest rate cut this year, citing Lian Ping,
chief economnist of Bank of Communications. China will be relatively
prudent on interest rate adjustment, Lian said.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 102.0 unch.
- Asia Pacific Sovereign CDS Index 71.50 +.5 basis point.
- NASDAQ 100 futures +.04%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- PPI Final Demand for June is estimated to rise +.2% versus a -.2% decline in May.
- PPI Ex Food and Energy for June is estimated to rise +.2% versus a -.1% decline in May.
9:00 am EST
- Net Long-Term TIC Flows for May are estimated at $25.0B versus -$24.2B in April.
9:15 am EST
- Industrial Production for June is estimated to rise +.3% versus a +.6% gain in May.
- Capacity Utilization for June is estimated to rise to 79.3% versus 79.1% in May.
- Manufacturing Production for June is estimated to rise +.3% versus a +.6% gain in May.
10:00 am EST
- The NAHB Housing Market Index for July is estimated to rise to 50.0 versus 49.0 in June.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory decline of
-2,100,000 barrels versus a -2,370,000 barrel decline the prior week.
Gasoline supplies are estimated to rise by +610,000 barrels versus a
579,000 barrel gain the prior week. Distillate inventories are estimated
to rise by +1,600,000 barrels versus a +227,000 barrel gain the prior
week. Finally, Refinery Utilization is estimated to rise by +.14% versus
a +.2% gain the prior week.
2:00 pm EST
- Fed's Beige Book release.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Fisher speaking, Fed's Williams speaking, Bank of Canada rate
decision and the weekly MBA mortgage applications report could impact
trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and industrial shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 75% 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) 11.88 +.51%
- Euro/Yen Carry Return Index 144.04 -.22%
- Emerging Markets Currency Volatility(VXY) 5.91 +.68%
- S&P 500 Implied Correlation 49.86 +2.28%
- ISE Sentiment Index 86.0 -23.21%
- Total Put/Call .83 -5.86%
Credit Investor Angst:
- North American Investment Grade CDS Index 57.21 -.23%
- European Financial Sector CDS Index 75.52 +4.65%
- Western Europe Sovereign Debt CDS Index 36.38 -1.62%
- Asia Pacific Sovereign Debt CDS Index 71.46 +.75%
- Emerging Market CDS Index 232.87 +2.33%
- China Blended Corporate Spread Index 304.46 n/a
- 2-Year Swap Spread 18.25 +1.25 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -10.75 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 207.0 -1.0 basis point
- China Import Iron Ore Spot $98.0/Metric Tonne +.1%
- Citi US Economic Surprise Index -15.70 +.2 point
- Citi Emerging Markets Economic Surprise Index -3.80 +.6 point
- 10-Year TIPS Spread 2.24 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +29 open in Japan
- DAX Futures: Indicating +23 open in Germany
Portfolio:
- Lower: On losses in my tech/biotech/medical sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Israel Renews Gaza Bombing After Hamas Rejects Truce Plan. Israel
renewed its air raids on the Gaza Strip after a Palestinian rocket
bombardment left an Egyptian truce proposal the Israelis accepted in
tatters. Hamas,
the militant movement that controls Gaza, said it wasn’t consulted on
the Egyptian plan, and its military wing rejected it. Within six hours,
the cease-fire efforts crumbled after Gaza militants barraged Israel
with 50 rockets, according to the Israeli military’s count. The
developments heightened the possibility that Israel, which has mobilized
38,000 reservists, would send ground forces to invade Gaza. “If Hamas
doesn’t accept the truce proposal -- and that’s how it looks now --
Israel will have the international legitimacy to broaden the military
offensive,” Prime Minister Benjamin Netanyahu said shortly before the
air campaign resumed.
- Europe Manufacturing a Weak Spot as SKF Sees Stagnant Demand. A recovery in Europe’s manufacturing
industry is struggling to gather steam, curbed by subdued demand
for factory equipment and automotive parts, according to SKF AB (SKFB),
a ball-bearing maker that’s a bellwether for industrial health. While Europe and Latin America face restrained demand in
the third quarter, orders from North America and Asia will be
“slightly higher,” said Tom Johnstone, who has led the
Gothenburg, Sweden-based company for more than a decade.
- German ZEW Investor Confidence Drops for Seventh Month.
German investor confidence declined for a seventh month in July as
slower growth and geopolitical risks weighed on the outlook for Europe’s
largest economy. The ZEW Center for European Economic Research in
Mannheim said its index of investor and analyst expectations, which aims
to predict economic developments six months in advance, dropped to 27.1
from 29.8 in June. Economists forecast a decrease to 28.2, according to
the median of 36 estimates in a Bloomberg News survey. The gauge has
dropped every month since reaching a
seven-year high in December.
- China Rate Swap Advances to 12-Week High as Easing Bets Recede. China’s
benchmark interest-rate swaps rose to a 12-week high as a pickup in
lending cooled speculation the central bank will ease monetary policy.
M2 (CNMS2YOY), the broadest gauge of money supply, rose 14.7 percent in
June from a year earlier, the fastest pace since August,
official data showed today. New yuan loans increased to the
highest level in five months.
- Boko Haram Killed 2,053 Civilians in Nigeria This Year. The Nigerian Islamist militant group
Boko Haram killed at least 2,053 civilians in the first six
months of this year in an increasing number of attacks that may
constitute crimes against humanity, Human Rights Watch said. Boko Haram carried out 95 attacks that included bombings on
more than 70 towns and villages in northeastern Nigeria, New
York-based Human Rights Watch said today in a statement. The
figures were based on analysis of media reports and field
investigations, it said.
- Global Savings Glut II Leaves Risk Rally Prone to Reverse. It’s been almost a decade since Ben S. Bernanke pointed to a global savings glut to explain low
interest rates. One financial crisis and a global recession later, the glut
lives on. The currency reserves of developing nations swelled to
$11.9 trillion from $6.9 trillion in 2008, led by a $2 trillion
boost in China. That has helped absorb bond sales of rich nations, helping
send average 10-year yields on Group of Seven government bonds
to about 2.5 percent from 15 percent at the start of the 1980s.
- WTI Oil Falls Below $100 a Barrel as Supply Risks Abate.
West Texas Intermediate oil fell
below $100 and Brent tumbled to a three-month low as supply-disruption concerns eased with Libyan output gains and Iraqi
shipments are unaffected by an insurgency.
- Wall Street Wins (Or Doesn’t Lose Much) on Junk Trading.
Here’s what went right: Banks from JPMorgan Chase & Co. (JPM) to
Goldman Sachs Group Inc. (GS) reported second-quarter earnings that were
higher than analysts expected largely on the back of debt-trading
revenue that declined less than some of the banks
predicted. In particular, they benefited from more transactions
in high-yield bonds, a record June for U.S. corporate-debt sales
and a couple of decent wagers on Treasuries. Junk-bond trading volumes soared to a daily average of $7
billion in June, a record for the month and 14 percent higher
than the period in 2013, according to data from the Financial
Industry Regulatory Authority.
- Fed Warns Junk Debt Excess May Lead to Higher Defaults. The
Federal Reserve warned that froth in the riskiest parts of debt markets
may lead to more defaults. “Signs of excesses that could lead to higher
future defaults and losses have emerged in some sectors, including for
speculative-grade corporate bonds and leveraged loans,” according to a
report published today by the central bank as part of Chair Janet Yellen’s semi-annual testimony to the Senate
Banking Committee. A boom in the market for junk-rated loans has drawn the
attention of the Fed and the Office of the Comptroller of the
Currency, who have been urging banks since last year to curb
risky lending. While issuance has been robust, “underwriting
standards have loosened,” according to today’s report. There have been $222.7 billion of new loans arranged in the
U.S. this year after a record $357.9 billion in 2013, according
to data compiled by Bloomberg. Loans helped finance some of the
biggest leveraged buyouts during the last credit boom.
- Federal Debt to Reach 106% of Economy in 2039, CBO Says. The
U.S. debt held by the public is expected to rise to 106 percent of the
economy in 2039 from 74 percent this year, largely driven by increases
in the cost of health benefits, the Congressional Budget Office
said. To put federal finances on a sustainable path, Congress must boost
revenue, cut spending on benefit programs or combine the approaches,
the nonpartisan CBO said in its long-term budget outlook released today.
“The unsustainable nature of the federal tax and spending policies
specified in current law presents lawmakers and the public with
difficult choices,” CBO said in the report. “Unless substantial changes
are made to the major health-care programs and Social Security, spending
for those programs will
equal a much larger percentage of GDP in the future than it has in the
past.” Higher spending on Medicare and Medicaid will cause the budget
deficit to begin increasing in 2016, according to CBO’s projections. As a
share of the economy, the budget deficit will increase to 3.7 percent
in 2024 and 6.4 percent in 2039, from 2.8 percent in 2014, theagency said today.
MarketWatch.com:
CNBC:
- Fed slaps stocks with unusually targeted comments on valuation froth. The Federal Reserve's unusually targeted comments that biotech and
social media stocks are overheated sucked the wind out of a rally that
had taken the Dow to a new high in early trading. In a section of its
Monetary Policy report released Tuesday, the
Fed noted: "...signs of risk-taking have increased in some asset
classes. Equity valuations of smaller firms as well as social media and
biotechnology firms appear to be stretched, with ratios of prices to
forward earnings remaining high relative to historical norms." The small cap Russell 2000, home to small cap and many speculative names, led the declines, losing more than 1 percent in late morning trading.
- Here's what the Fed needs to do: STOP IT. Here's a novel solution: DISCONTINUE A FED POLICY THAT HAS DONE NOTHING
TO KICKSTART ROBUST ECONOMIC GROWTH NOR SUBSTANTIALLY INCREASE
EMPLOYMENT, AND INSTEAD, HAS INFLATED ASSETS HELD MAINLY BY THE
WEALTHIEST 1 PERCENT, AND INCREASED THE WEALTH GAP BETWEEN RICH AND POOR
TO RECORD LEVELS.
- Alpha addict: The amazing career of Leon Cooperman.
- Why a $60B fund manager is sitting in 20 percent cash. (video)
ZeroHedge:
Business Insider:
Les Echos:
- ECB's Praet Says Investment in France Is 'Acute' Problem. The
ECB's chief economist comments in an interview with daily newspaper Les
Echos that the pace of recovery in France is "disappointing."
Style Underperformer:
Sector Underperformers:
- 1) Gold & Silver -2.30% 2) Coal -2.21% 3) Biotech -1.84%
Stocks Falling on Unusual Volume:
- ALB, LO, KORS, TOUR, WWW, RAI, WLL, CHT, SHPG, BMA, FAST, GPI, USLV, AXDX, MPLX, VJET, ABBV, OAS, HOG, BPT, JNJ, CEO, CBSH, LXK, PRGO, TTS, MO, CLR, NKTR, RUBI, AAN and AXDX
Stocks With Unusual Put Option Activity:
- 1) EWT 2) CSX 3) EEM 4) KSS 5) IBB
Stocks With Most Negative News Mentions:
- 1) KORS 2) LO 3) TSLA 4) LXK 5) COH
Charts:
