Broad Equity Market Tone:
- Advance/Decline Line: Slightly Lower
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 18.90 +18.72%
- Euro/Yen Carry Return Index 151.50 -.09%
- Emerging Markets Currency Volatility(VXY) 10.79 -.74%
- S&P 500 Implied Correlation 67.64 +3.19%
- ISE Sentiment Index 52.0 -49.41%
- Total Put/Call .89 -10.10%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.12 unch.
- America Energy Sector High-Yield CDS Index 641.0 +1.05%
- European Financial Sector CDS Index 67.44 +1.46%
- Western Europe Sovereign Debt CDS Index 27.20 -2.37%
- Asia Pacific Sovereign Debt CDS Index 67.15 +.34%
- Emerging Market CDS Index 338.33 +.84%
- China Blended Corporate Spread Index 331.44 -3.02%
- 2-Year Swap Spread 23.0 +2.75 basis points
- TED Spread 24.0 -1.75 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -14.5 -.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .04% +3.0 basis points
- Yield Curve 151.0 +1.0 basis point
- China Import Iron Ore Spot $71.26/Metric Tonne +.15%
- Citi US Economic Surprise Index 34.70 -3.7 points
- Citi Eurozone Economic Surprise Index 10.20 +1.0 point
- Citi Emerging Markets Economic Surprise Index -12.40 +.6 point
- 10-Year TIPS Spread 1.68 +4.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -21 open in Japan
- DAX Futures: Indicating +38 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech/retail sector longs and index hedges
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Russian Inflation Soars to Fastest Since 2009 After Ruble Rout.
Russian inflation quickened to the fastest in more than five years
after the country’s worst currency crisis since 1998 stoked price
growth. Consumer prices rose 11.4 percent in December from a year
earlier, compared with 9.1 percent in November, the Federal Statistics
Service in Moscow said today in an e-mailed statement, citing
preliminary data. That exceeded the median estimate of 14 economists in a
Bloomberg survey for 11.2
percent. Prices jumped 2.6 percent from the previous month.
- Kremlin Foe Navalny Defiant at 'Filthy' Punishment as a Weakened Putin Stares Down Dissent. Russian opposition leader Alexey Navalny remains defiant after
violating house arrest to reach a protest by the Kremlin, thumbing his
nose at the system that spared him while locking up his brother. The
38-year-old lawyer poked fun as policemen remained stationed outside
his apartment after he was escorted home from the rally, saying on
Twitter today: “They themselves don’t know why they’re standing there.
Don’t want water or tea.”
- Greek Polling Points to Coalition as Voters Reject System. Greek
polling data suggest neither Prime Minister Antonis Samaras’s New
Democracy nor the main opposition Syriza party will win an outright
majority in next month’s election, meaning coalition negotiations or
even a repeat
vote will be needed. Pollster Elias Nikolakopoulos said current
projections of voting intentions for the Jan. 25 elections show the
lower limit for securing at least 151 seats in the country’s 300-seat
chamber is about 38 percent. Alexis Tsipras’s Syriza led New Democracy
by 28 percent to 25 percent in a survey by Marc published on Alpha TV’s
website this week.
- Emerging Stocks Slide for Second Year as Oil, Fed Curtail Demand. Emerging-market stocks headed for their
first back-to-back annual loss in 12 years as sliding oil and
bets for higher U.S. interest rates curbed the appeal of riskier assets. Chinese shares jumped on the final day of 2014. The
MSCI Emerging Markets Index added 0.4 percent to 958.06 at 12:06 p.m.
in New York, reducing the decline this year to 4.5 percent. While
crude’s plunge into a bear market in 2014 dragged down stocks of oil
exporters from Russia to Saudi Arabia, it supported shares of net energy
importers including Turkey and India. Developing-country currencies and
equities also fell amid
bets that the Federal Reserve will raise interest rates amid
signs the U.S. economy is strengthening.
- European Stocks Climb, Trimming First December Drop Since 2008.
European stocks advanced in the last day of
the year, paring their first December decline since 2008. The Stoxx Europe 600 Index rose 0.4 percent to 342.28
today, trimming this month’s loss to 1.4 percent. The gauge fell
in December amid a slump in energy producers and in Greek
equities as Prime Minister Antonis Samaras failed to get enough
backing for his presidential candidate, leading to early
elections. The Stoxx 600 has gained for a third year, up 4.3
percent in 2014.
- Commodities Head for Record Losing Run on Oil to Dollar. Commodities headed for the biggest annual
loss since the global financial crisis in 2008, retreating for a
record fourth year, as a global glut spurred a rout in oil prices and a stronger dollar cut the allure of raw materials. The
Bloomberg Commodity Index (BCOM), which tracks 22 products from crude
to copper, fell 0.9 percent to 105.1845 points at 8:53 a.m. in New York,
after dropping to the lowest level since March 2009 earlier today. It’s
lost 16 percent this year, with crude, gasoline and heating oil the
biggest decliners. A fourth
year of losses would be the longest since at least 1991.
- Oil Drops in Worst Year Since ’08. Crude oil fell, heading for its worst year
since 2008 amid a global supply glut, dragging commodities to a
fourth straight annual drop. U.S. equities fluctuated on the way
to a 13 percent rally this year, while stocks rose in Europe to
finish a third yearly increase. West Texas Intermediate crude dropped 2.1 percent to $52.98
a barrel at 12:06 p.m. in New York and the Bloomberg Commodity
Index (BCOM), which tracks 22 products from crude to copper, decreased
1.1 percent for a 17 percent slide in 2014.
- U.S. Easing of Oil Exports Challenges OPEC's Strategy. The Obama administration’s move to allow exports of ultralight crude
without government approval may encourage shale drilling and thwart
Saudi Arabia’s strategy to curb U.S. output, further weakening oil
markets, according to Citigroup Inc. A type of crude known as
condensate can be exported if it is run through a distillation tower,
which separates the hydrocarbons that make up the oil, according to U.S.
government guidelines published yesterday. That may boost supplies ready to be sold overseas to as much as 1 million barrels a day by the end of 2015, Citigroup analysts led by Ed Morse in New York said in an e-mailed report.
- Inflation No-Show Unlikely to Slow Fed Rate Liftoff: Economy.
Economists are slashing U.S. inflation
forecasts for 2015 as oil prices tumble. What’s not changing are
predictions that the Federal Reserve will raise its benchmark interest
rate anyway, probably around mid-year. “We’re still saying June with risks to September,” said Michael Gapen, the New York-based chief U.S. economistfor
Barclays Plc. The Fed “can push rates higher in the middle of
the year, even though visually that may look awkward if headline
inflation is around zero.”
- Apple(AAPL) Customers Sue Over Shortage of Storage Space in iOS 8. Apple Inc. (AAPL) misleads consumers about the amount of storage space used by its iOS 8 operating system in
iPhones, iPods and iPads, two users claimed in a suit targeting
the software, adding a new wrinkle to a product introduction
that has been riddled with hiccups and missteps.
Wall Street Journal:
Fox News:
CNBC:
ZeroHedge:
Business Insider:
- The Ruble Is Plunging. The ruble is getting slammed. At around 11:20 a.m. ET Wednesday, it got as weak as 62.03 rubles per dollar after closing 56.71 on Tuesday. This was a nearly 5% plunge.
NY Post:
Reuters:
- Oilfield housing firm's stumble may herald more oil industry pain. A nasty profit warning
and deep job cuts. A gutted capital budget, a suspended dividend
and shares tumbling by more than half on a single day. The retrenchment at Civeo Corp, which provides
temporary housing for oilfield workers and miners, is the
most-severe symptom of pain inflicted on the oil service
industry by the slide in crude prices, and may presage similar
steps by peers.
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Oil Tankers -1.0% 2) Disk Drives -.70% 3) Energy -.62%
Stocks Falling on Unusual Volume:
- USLV, IEP, BIS, MVO, BLX, MCF, WRLD, WBAI, WGO, YDLE, HCLP, AGTC, SFS, LOCO and COHR
Stocks With Unusual Put Option Activity:
- 1) GT 2) XLU 3) XLK 4) ALTR 5) IP
Stocks With Most Negative News Mentions:
- 1) WMT 2) AAPL 3) BK 4) AEP 5) BBSI
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Biotech +1.34% 2) Airlines +1.21% 3) Homebuilders +1.06%
Stocks Rising on Unusual Volume:
Stocks With Unusual Call Option Activity:
- 1) ATLS 2) CVEO 3) INFN 4) LOCO 5) BYD
Stocks With Most Positive News Mentions:
- 1) GRUB 2) ANFI 3) OVAS 4) MSFG 5) MRCY
Charts:
Evening Headlines
Bloomberg:
- Ruble Sees Worst Annual Drop Since 1998 as Oil, Sanctions Weigh. The ruble had its worst annual slide since its 1998 default as a slew of government interventions failed to support the currency.
Russia’s currency lost 41 percent this year, the most in the world
after Ukraine’s hryvnia. Government bonds fell the most in emerging
markets in 2014, with the five-year yield climbing 822 basis points to
15.44 percent. The Micex Index posted the first decline in three years.
The ruble rose 5 percent to 55.5495 a dollar by 7:01 p.m. in London
after dropping 7.4 percent yesterday.
- China Needs Its Lehman Moment. The
travails of Abenomics should be a warning to President Xi Jinping of
China, whose nation increasingly seems at risk of a Japan-like lost
decade. Although speculation has focused on the "why" and the "how"
of the Japanization of China's economy, the year ahead will provide
clues to the question of "when." China in 2015 is likely to look a lot like Japan in 1998. when the zombification of its economy truly began.
The Japanese government had recently allowed Yamaichi Securities to
crash, an epochal moment for a government that had spent the preceding
decade resisting any kind of reform. The collapse of Yamaichi, a
100-year old institution founded at the height of the Meiji Restoration,
was Japan's Lehman Moment, and suggested a new political will to force
banks to write down bad loans from the 1980s. Then Japan lost its nerve.
When Long-Term Credit Bank of Japan and other institutions teetered on
the edge in 1998, the government rescued them. Many weak institutions
and irresponsible bankers were propped up in subsequent years. Rather
than fix a financial system suffocating under liabilities and
beset by complacent executives, the Japanese government chose to treat
the symptoms of the dysfunction with zero interest rates and fiscal
handouts. Abe's government is the latest to follow this tired strategy.
- Emerging Fund Outflows Biggest Since June 2013, IIF Says. Global investors pulled the most funds out
of emerging markets this month since June 2013 as oil plunged
and concern grew the U.S. Federal Reserve will soon raise
interest rates. Net outflows from developing funds totaled $11.5 billion in
December, with $7.8 billion withdrawn from debt and $3.7 billion
taken out of equities, the International Institute of Finance
said in a statement dated yesterday.
- Oil Falls in Worst Year Since 2008 as Asian Stocks Gain. Crude oil resumed its slump, heading for its
worst year since 2008 amid speculation U.S. stockpiles data
today will fuel concern over a global supply glut. Asian stocks
climbed while gold and nickel gained.
West Texas Intermediate crude fell 0.5 percent to $53.83 a
barrel by 11:00 a.m. in Hong Kong, slipping for the fourth time in five days to trade near a five-year low. Gold added 0.2
percent while nickel rose 0.5 percent. The MSCI Asia Pacific
excluding Japan Index increased 0.2 percent.
- OPEC Resolve on Supply Promises No Calm for Oil Markets: Energy. Oil’s biggest price swings in three years
are poised to continue as OPEC cedes no ground to competing
suppliers.
Oil traders’ expectations for future swings, known as
implied volatility, surged since Saudi Arabia and fellow members
of the Organization of Petroleum Exporting Countries decided
Nov. 27 to keep pumping crude despite a supply glut. That will
mean prices fluctuating in the next several years by even more
than the $57-a-barrel move in 2014, Bank of America Corp. says.
- Iron Ore to Cap Annual Loss. Iron ore
is poised to cap the biggest annual decline in at least five years as
surging supplies from the world’s biggest producers outstrips demand
growth in China, with the raw material dropping for four straight quarters in 2014.
Ore with 62 percent content delivered to Qingdao, China,
lost 47 percent this year to $71.15 a dry metric ton yesterday,
according Metal Bulletin Ltd. The commodity fell to $66.84 on
Dec. 23, the lowest level since June 2009.
- Copper Poised for Worst Year Since 2011 as China’s Economy Cools. Copper
headed for the biggest annual loss in three years amid signs of a
sustained economic slowdown this year in China, the world’s largest
metals consumer. The final reading this month for the manufacturing
Purchasing Managers’ Index for China from HSBC Holdings Plc and Markit
Economics came in at 49.6, the lowest in seven months. A figure below 50
signifies contraction. China is on course for the slowest year of
economic growth since 1990, a separate survey shows. Copper for delivery
in three months on the London Metal Exchange was little changed at
$6,328 a metric ton by 10:20 a.m. in Hong Kong. The metal is poised to fall for a second month andis headed for a 14 percent decline this year, the second-worst
performer among the six main base metals on the LME.
- Five Charts Show Why IBM(IBM) Is Worst Dow Performer for Second Year. Since
Ginni Rometty became chief executive officer in January of 2012, the
shares have fallen 16 percent -- 14 percent of that this year alone.
Investors have dumped the stock as Rometty struggles to re-imagine
International Business Machines Corp. as a contender in cloud computing,
data analytics and mobile
technology. So far, those new areas haven’t made up for a decline in
sales of legacy hardware and technology consulting services.
Wall Street Journal:
- Dollar’s Surge Pummels Companies in Emerging Markets. From Brazil to Thailand, Firms That Sold Bonds in Dollars Now Face Steep, Even Staggering Costs. The soaring U.S. dollar is squeezing companies in emerging markets
from Brazil to Thailand that now face higher costs on roughly $1
trillion in bonds sold to investors before the greenback’s surge.
Fox News:
MarketWatch.com:
CNBC:
- Everyone involved in oil will be squeezed: Pro. (video) Oil will continue to fall and everybody involved is going to get squeezed, energy pro John Kilduff told CNBC on Tuesday. That includes the so-called picks and shovels companies that aren't directly involved in oil production.
- This market trend could be 'very negative'. Both mutual and exchange-traded funds saw their biggest weekly inflows
in history last week. ETFs alone have witnessed their largest-ever three-month run, according to data analysis firm TrimTabs. U.S.
funds took in a combined $36.5 billion over the most recent reporting
week, according to Thomson Reuters Lipper. That comes as part of a run
that has seen $81.3 billion alone
come into the $2 trillion ETF space since October, according to
TrimTabs. That's the largest three-month flow ever, topping the influx
from July through September 2008.
TrimTabs CEO David Santschi said the strong flows are
"very negative from a contrarian perspective."
Zero Hedge:
Business Insider:
Reuters:
Telegraph:
de Volkskrant:
- ECB's Knot Says There's No Proposal for QE Yet. ECB Governing
Council member Klaas Knot says policy makers will have a discussion next
month on the necessity of quantitative easing and whether it will help,
citing an interview. "As long as Europe isn't politically willing to
share more risks within the eurozone, it's not up to us to take such a
decision ourselves via the back door." Economic and monetary cooperation
without further political cooperation is unstable, he said. Population
in northern Europe has "deep distrust" of willingness of southern
European countries to make "painful, internal reform measures". Sees a
threat of a transfer union whereby money flows structurally from north
to south. Knot is also president of the Dutch central bank.
Rheinische Post:
- Greek exit from euro zone conceivable if Syriza wins elections,
Michael Fuchs, deputy chairman of German Chancellor Angela Merkel's
party, says in interview. If Syriza cuts back reform, austerity
measures, Troika can cut back loans to Greece.
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 67.0 +3.25 basis points.
- NASDAQ 100 futures +.09%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Initial Jobless Claims are estimated to rise to 290K versus 280K the prior week.
- Continuing Claims are estimated to fall to 2368K versus 2403K prior.
9:45 am EST
- Chicago Purchasing Manager for December is estimated to fall to 60.0 versus 60.8 in November.
10:00 am EST
- Pending Home Sales for November are estimated to rise +.5% versus a -1.1% decline in October.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+133,330 barrels versus a +7,267,000 barrel gain the prior week.
Gasoline inventories are estimated to rise by +1,677,780 barrels versus a
+4,083,000 barrel gain the prior week. Distillate supplies are
estimated to rise by +1,694,440 barrels versus a +2,303,000 barrel gain
the prior week. Finally, Refinery Utilization is estimated to fall by
-.19% versus unch. prior.
Upcoming Splits
Other Potential Market Movers
- The China Official PMI, weekly Bloomberg Consumer Comfort Index and weekly MBA mortgage applications report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by transport 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: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 16.01 +6.31%
- Euro/Yen Carry Return Index 151.72 -.93%
- Emerging Markets Currency Volatility(VXY) 10.85 +.28%
- S&P 500 Implied Correlation 66.79 +2.61%
- ISE Sentiment Index 74.0 +25.42%
- Total Put/Call 1.0 +19.05%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.12 +.72%
- America Energy Sector High-Yield CDS Index 634.0 -.08%
- European Financial Sector CDS Index 66.46 +4.88%
- Western Europe Sovereign Debt CDS Index 27.86 +1.13%
- Asia Pacific Sovereign Debt CDS Index 66.41 +4.39%
- Emerging Market CDS Index 335.45 +1.46%
- China Blended Corporate Spread Index 341.76 +.32%
- 2-Year Swap Spread 20.25 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.25 +.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% +1.0 basis point
- China Import Iron Ore Spot $71.15/Metric Tonne +3.55%
- Citi US Economic Surprise Index 38.40 -1.6 points
- Citi Eurozone Economic Surprise Index 9.20 +4.1 points
- Citi Emerging Markets Economic Surprise Index -13.0 +.5 point
- 10-Year TIPS Spread 1.64 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -25 open in Japan
- DAX Futures: Indicating -15 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
