Evening Headlines
Bloomberg:
- U.S. Says Russia Firing Artillery Into Ukraine. The U.S.
said Russia is firing artillery across its border into Ukraine, the
first time American officials have publicly alleged such direct
participation in fighting on behalf of separatists. “Russia is
firing artillery from within Russia to attack Ukrainian military
positions,” State Department spokeswoman Marie Harf told reporters today
in Washington, offering no
evidence for what she described only as information “from our
intelligence friends.”
- Obama Says Jet Downing Pushing EU Toward Russia Sanctions.
President Barack Obama said he expects the shooting down of the
Malaysian airliners to push European nations toward tougher sanctions
against Russia. Obama said the “intertwined” economies of the European
Union and Russia has been a concern for U.S. allies as they
respond to Russian involvement in the turmoil in Ukraine.
- Asian Stocks Rise After S&P 500 Record; Won, Copper Slip.
Asian stocks climbed, with the regional index at a six-year high and
headed for its 10th advance in 11 weeks. The South Korean won weakened a
second day versus the dollar, while copper pared its weekly gain. The MSCI Asia Pacific Index rose 0.1 percent by 9:59 a.m. in Tokyo, set for a weekly climb of 1.2 percent.
- Coal Company Pain Accelerates as Bankruptcy Cases Rise. The coal business, after fueling the Industrial Revolution and
powering U.S. growth for much of the past century, is now beset by a glut of cheap natural gas and tighter regulation.
James River Coal Co. in many ways epitomizes these ills. After filing
for bankruptcy almost four months ago with plans to sell its business,
the Richmond,
Virginia-based company has delayed an auction twice without announcing a
buyer.
Wall Street Journal:
- Islamist Militants Gain in Syria. Islamic State militants launched assaults on Syrian forces across
three provinces on Thursday that killed key government figures,
including two brigadier generals, said activists and residents, in a
rare confrontation between the two sides during the war. In one
assault, the jihadists besieged two military bases outside Hasakah city
in Syria's east, killing a commanding brigadier general, according to
the Syrian Observatory for Human...
- The ObamaCare-IRS Nexus. The supposedly independent agency harassed the administration's political opponents and saved its health-care law.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 101.0 -.75 basis point.
- Asia Pacific Sovereign CDS Index 70.0 unch.
- NASDAQ 100 futures -.24%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Durable Goods Orders for June are estimated to rise +.5% versus a -1.% decline in May.
- Durables Ex Transports for June are estimated to rise +.5% versus a -.1% decline in May.
- Cap Goods Orders Non-defense Ex Air for June is estimated to rise +.5% versus a +.7% gain in May.
Upcoming Splits
Other Potential Market Movers
- The German IFO, UK gdp and the (SCHW) business update could also 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 mixed 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: Lower
- Sector Performance: Mixed
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 11.82 +2.60%
- Euro/Yen Carry Return Index 143.11 +.31%
- Emerging Markets Currency Volatility(VXY) 5.81 +.17%
- S&P 500 Implied Correlation 55.12 +3.14%
- ISE Sentiment Index 93.0 -39.22%
- Total Put/Call .90 +20.0%
Credit Investor Angst:
- North American Investment Grade CDS Index 58.69 +.47%
- European Financial Sector CDS Index 66.30 -.42%
- Western Europe Sovereign Debt CDS Index 34.86 -.56%
- Asia Pacific Sovereign Debt CDS Index 69.84 -.39%
- Emerging Market CDS Index 239.69 +.25%
- China Blended Corporate Spread Index 303.44 -.12%
- 2-Year Swap Spread 20.25 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -6.5 +.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 202.0 +3.0 basis points
- China Import Iron Ore Spot $93.60/Metric Tonne -.74%
- Citi US Economic Surprise Index -26.0 -2.7 points
- Citi Emerging Markets Economic Surprise Index -.7 +2.3 points
- 10-Year TIPS Spread 2.24 +3.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating +80 open in Japan
- DAX Futures: Indicating -12 open in Germany
Portfolio:
- Higher: On gains in my retail/tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 50% Net Long
Bloomberg:
- Yatsenyuk Resigns as Ukraine’s Premier After Coalition Dissolves. Ukrainian Prime Minister Arseniy Yatsenyuk resigned after two parties
quit the ruling coalition and President Petro Poroshenko signaled his
support for early elections. Yatsenyuk told the parliament in
Kiev today that he’s stepping down after losing his allies’ backing and
failing to pass legislation. Former world boxing champion Vitali
Klitschko’s UDAR and Svoboda, a nationalist group, said they’d leave the
coalition and seek a snap parliamentary ballot, according to statements
today on their websites.
- EU May Target Putin’s Spy Chiefs as U.S. Calls for MH17 Response. The
European Union is preparing to sanction Russia’s most senior spies and
security officials, some of whom served alongside President Vladimir
Putin in the Cold War, as it seeks to step up its response to the
conflict in Ukraine, according to a draft document
obtained by Bloomberg. Alexander Bortnikov, director of the
Federal Security Service which replaced the Soviet-era KGB, and Mikhail
Fradkov, the head of the Foreign Intelligence Service, are on the
provisional list of sanctioned Russian officials, along with the head of
the Security Council, Nikolai Patrushev, and Kremlin-backed Chechen
leader Ramzan Kadyrov.
- Air Algerie-Operated Plane Disappears en Route to Algiers. An
Air Algerie MD-83 carrying 116 people crashed in the desolate Sahel
region of north Africa as it approached Algier en route from Burkina
Faso, marking the third major civil-aviation disaster in the space of a
week. Flight
AH5017, which took off in the west African country shortly after
midnight carrying 110 passengers and six Spanish crew, was scheduled to
land at 5:10 a.m. local time, according to Swiftair, a charter company
based in Spain. The jet crashed about three hours earlier, 80 kilometers
(50 miles) from the town of Gossi, Mali, according to Burkinabe
authorities.
- European Stocks Rise on Euro-Area Manufacturing, Services. European stocks rose for a third day as manufacturing gains in China and the euro area boosted investors’ confidence that the economic recovery is on track. Nokia Oyj jumped to a three-year high after it posted second-quarter earnings that topped estimates. Danske Bank A/S rallied the most since August
after raising its annual earnings projection. BASF SE fell 1.5 percent
as earnings trailed analysts’ predictions. EasyJet Plc dropped 5 percent
after saying fares out of London are under pressure. The Stoxx Europe 600 Index climbed 0.4 percent to 344.33 at the close of trading.
- Iron Ore Drops to One-Month Low as Goldman Keeps Bearish View.
Iron ore extended losses to the
lowest level in a month after Goldman Sachs Group Inc. said
increasing production from Australia and Brazil will deepen a global
glut every year through 2018. Ore with 62 percent iron content at the
Chinese port of Tianjin fell 0.7 percent to $93.60 a dry ton today, the
lowest since June 24, according to data from The Steel Index Ltd. The
raw material will average $80 in 2015 from $107 this year, Goldman said
in a report, reiterating previous forecasts. Prices tumbled 30 percent
in 2014 as companies from Rio Tinto Group to BHP Billiton Ltd. (BHP)
increased output.
- Wall Street Junk Euphoria Backs Ackman’s Allergan Dreams. While
hedge-fund manager Bill Ackman has repeatedly failed to persuade
Allergan Inc. (AGN) to sell itself, that hasn’t stopped Wall Street
bankers from lining up to fund a potential deal with more than $20
billion of junk debt. Banks including Barclays Plc and Royal Bank of
Canada raised loan commitments to $8 billion from $7 billion and
pledged to arrange $12.4 billion of high-yield bonds to finance Valeant
Pharmaceuticals International Inc. (VRX)’s unsolicited $54 billion bid, a
filing showed yesterday. The bank debt includes a $5 billion term loan,
which would be the biggest of its kind backing a takeover this year,
data compiled by Bloomberg show. The commitments reflect how
unprecedented demand for high-yield, high-risk debt has made it easy for
a junk-rated borrower such as Valeant (VRX) to finance an acquisition
that exceeds the combined value of all other takeovers it’s ever
attempted.
- Shorting Junk Loans Just Got Easier as New Derivatives Unveiled. Wall Street has turned to financial engineering to solve one of junk-debt investors’ biggest problems: They can’t make wagers quickly enough in these illiquid markets where trades are completed over the phone. Banks are again resorting to derivatives to make it easier to place bullish and bearish bets amid a credit boom, allowing traders to amplify their profits or losses on debt rated below investment grade. In the latest innovation in this push, the biggest lenders are creating total-return swaps that seek to mimic the risk and reward tied to high-yield loans. JPMorgan Chase & Co. created a total-return swap based on Markit Group Ltd.’s iBoxx USD Liquid
Leveraged Loan Index in March, the first of its kind, according
to Markit. Translation: There are a lot of investors out there who are
considering going short.
MarketWatch.com:
CNBC:
ZeroHedge:
Business Insider:
Style Underperformer:
Sector Underperformers:
- 1) Homebuilders -4.30% 2) Gold & Silver -1.85% 3) Oil Service -1.71%
Stocks Falling on Unusual Volume:
- GOV, KODK, MTRN, DNKN, TRIP, ICE, PBYI, TSC, QCOM, PCP, PNK, BBEP, SILC, EDU, TEX, DHI, IVC, NBL, CLB, TAL, IQNT, CLFD, KNDI, UFS, LTM, TER, OII, CAT, GM, ACRX, CLGX, HOT, DO, ALXN, RS, THRX, USG, TAL, VAR, CUDA, TWI, PCP, TRIP, DHI, LTM and LMCA
Stocks With Unusual Put Option Activity:
- 1) MMM 2) IP 3) JNPR 4) DHI 5) QCOM
Stocks With Most Negative News Mentions:
- 1) GM 2) T 3) RCII 4) SNDK 5) TOL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Computer Hardware +1.76% 2) Retail +1.27% 3) Networking +1.36%
Stocks Rising on Unusual Volume:
- QRE, LOGI, VDSI, FFIV, CRI, UIS, SKX, FTNT, FB, RCL, UA, TSCO, VDSI, CSGP, HWAY, ETH, OSTK, PLCM, CSH, SXC, GRUB, GPK, FLS, EQT, JAH, RKUS, MKTX, BC, ORLY, HNT, CTXS, DPS and CHE
Stocks With Unusual Call Option Activity:
- 1) FFIV 2) MMM 3) INO 4) IP 5) XLNX
Stocks With Most Positive News Mentions:
- 1) FFIV 2) IP 3) CTXS 4) XLNX 5) DHI
Charts:
Evening Headlines
Bloomberg:
- U.S. Weighs New Russia Sanctions as Putin Isolated. The
U.S. is debating a new round of
sanctions on Russia and pressing the European Union to follow up with
its own penalties, Deputy National Security Adviser Ben Rhodes said.
Russian President Vladimir Putin’s government is increasingly isolated
for his support of the separatists in Ukraine, Rhodes told reporters at
the White House today. “It has badly backfired on them because it’s
earning him
complete international isolation and condemnation,” Rhodes
said. He gave no timetable for U.S. action.
- Kerry’s Gaza Truce Bid Undercut by Rifts in Region. As
U.S. Secretary of State John Kerry labors to end the violence in Gaza
and Israel, he’s confronting hostility and suspicion among Egypt, Qatar
and Turkey, whose rival agendas and diplomatic jockeying bring new
difficulty to the negotiations. The top U.S. diplomat hurriedly departed for the Middle
East this week with his customary eagerness to tackle complex
international issues. “We’ve got to get over there,” Kerry
told an aide in a phone call picked by Fox News microphones as
he made the rounds of Sunday talk shows. “It’s crazy to be
sitting around.”
- Skyscraper Mania Grips China as Ambitions Trump Economy. The eastern Chinese city of Suzhou
isn’t even the biggest in Jiangsu province, yet it’s joining a
national rush for the sky with what’s slated to become the world’s third-tallest building. By
2020, China may be home to six of the world’s 10 highest skyscrapers,
including Suzhou’s 700-meter (2,297-foot) Zhongnan Center. Developers
finished 37 structures higher than 200 meters, or about 50 stories, in
China last year, the most in the world, according to the Chicago-based Council on Tall Buildings and Urban Habitat, a non-profit organization that maintains the
world’s largest free database on tall buildings.
- Asian Stocks Climb for Fourth Day on China Manufacturing.
Asian stocks rose for a fourth day, with the regional benchmark index
extending a six-year high, after a Chinese manufacturing gauge rose to
its strongest reading in 18 months. LG Display Co. (034220) climbed 2.5
percent in Seoul after the supplier of panels for Apple Inc. devices
posted second-quarter profit that beat analyst estimates. Fujifilm
Holdings Corp. rose 2.1 percent in Tokyo after a report that sales of
high-end cameras boosted the company’s first-quarter operating profit.
Newcrest Mining Ltd. sank 4 percent as Australia’s biggest gold
producer said it may write down the value of its assets by as
much as A$2.5 billion ($2.4 billion). The MSCI Asia Pacific Index added 0.2 percent to 148.76 as
of 10:03 a.m. in Hong Kong as seven of its 10 industry groups
rose.
- Record Student-Loan Debt Prompts Treasury Push to Stem Defaults. The U.S. Treasury, which finances more than 90 percent of new student
loans, is exploring ways to make repayment more affordable as defaults
by almost 7 million Americans and other strapped borrowers restrain
economic growth. Leading the effort is Deputy Secretary Sarah Bloom
Raskin, who became the department’s No. 2 official in March after more
than three years as a Federal Reserve governor. As higher-education debt
swells to a record $1.2 trillion, Raskin, 53, is alert to parallels to
the mortgage crisis.
Wall Street Journal:
- Tragedy Fails to Quiet Ukraine. Two
Fighter Jets Shot Down Over Separatist Territory as Kiev Presses
Offensive. Two Ukrainian fighter jets were shot down Wednesday over
separatist-held territory not far from the site of the Malaysia Airlines
crash as international outrage over the tragedy has done little to slow
the fierce fighting in eastern Ukraine. While Kiev made significant
advances against rebels in the country's east in recent days, Ukrainian
and U.S. officials say Russian weapons are continuing to pour over the
border. The escalation in fighting suggests Russian President Vladimir
Putin has no intention of dialing back his support for the separatists,
denting Western hopes that international attention from the airliner
crash would force him to change course.
- Calpers Pulls Back From Hedge Funds. California Pension Fund to Cut Investments by 40%. Public pensions from California to Ohio are backing away from hedge
funds because of concerns about high fees and lackluster returns. Those
having second thoughts include officials at the largest public pension
fund in the U.S., the California Public Employees' Retirement System, or
Calpers. Its hedge-fund investment is expected to drop this year by
40%, to $3 billion, amid a review of that part of the portfolio, said a
person familiar with the changes. A spokesman declined to comment on the
size of the reduction but said...
- Obama to World: Drop Dead. The most provincial U.S. president in at least a century.
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
The Australian:
- Financial markets are playing down risks: Geithner. FORMER US Treasury Secretary Timothy Geithner has warned investors that
financial markets are underpricing risks but he defended vigorously the
Obama administration’s record of huge deficit spending and
unprecedented money creation.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 101.75 -1.25 basis points.
- Asia Pacific Sovereign CDS Index 70.0 -1.5 basis points.
- NASDAQ 100 futures +.08%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (DPS)/.91
- (PTEN)/.32
- (DO)/.56
- (PHM)/.25
- (ABC)/.92
- (DHI)/.49
- (HSY)/.76
- (CELG)/.89
- (GM)/.59
- (RCL)/.53
- (CLF)/-.09
- (BSX)/.19
- (PCP)/3.35
- (LLY)/.66
- (LUV)/.61
- (ALXN)/1.07
- (F)/.36
- (UA)/.07
- (ZMH)/1.49
- (RTN)/1.59
- (MMM)/1.91
- (CAT)/1.52
- (BMY)/.44
- (UNP)/1.43
- (ALTR)/.37
- (SBUX)/.66
- (CERN)/.40
- (V)/2.10
- (AMZN)/-.14
- (CB)/1.91
- (KLAC)/.86
- (FLEX)/.22
- (DECK)/-1.29
- (AAL)/1.96
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 307K versus 302K the prior week.
- Continuing Claims are estimated to rise to 2510K versus 2507K prior.
9:45 am EST
- Preliminary Markit US Manufacturing PMI for July is estimated to rise to 57.5 versus 57.3 in June.
10:00 am EST
- New Home Sales for June are estimated to fall to 475K versus 504K in May.
11:00 am EST
- The Kansas City Fed Manufacturing Index for July is estimated at 6.0 versus 6.0 in June.
Upcoming Splits
Other Potential Market Movers
- The
Japan CPI, Eurozone PMI, weekly Bloomberg Consumer Comfort Index and
the weekly EIA natural gas inventory report could also impact trading
today.
BOTTOM LINE: Asian indices are mostly higher, boosted by financial and real estate 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.
