Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 20.36 -3.65%
- Euro/Yen Carry Return Index 147.48 +.32%
- Emerging Markets Currency Volatility(VXY) 10.65 -.84%
- S&P 500 Implied Correlation 66.65 -.95%
- ISE Sentiment Index 95.0 -4.04%
- Total Put/Call 1.08 -3.57%
Credit Investor Angst:
- North American Investment Grade CDS Index 70.65 -1.31%
- America Energy Sector High-Yield CDS Index 718.0 +2.65%
- European Financial Sector CDS Index 71.55 +.06%
- Western Europe Sovereign Debt CDS Index 29.85 +2.12%
- Asia Pacific Sovereign Debt CDS Index 72.48 -2.53%
- Emerging Market CDS Index 378.66 -1.82%
- China Blended Corporate Spread Index 369.68 +2.96%
- 2-Year Swap Spread 22.50 -.5 basis point
- TED Spread 23.25 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.5 +.25 basis point
Economic Gauges:
- 3-Month T-Bill Yield .03% +1.0 basis point
- Yield Curve 136.0 +4.0 basis points
- China Import Iron Ore Spot $70.96/Metric Tonne -.74%
- Citi US Economic Surprise Index 29.30 +6.5 points
- Citi Eurozone Economic Surprise Index 10.60 -.3 point
- Citi Emerging Markets Economic Surprise Index -12.80 +1.1 points
- 10-Year TIPS Spread 1.57 -1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating +285 open in Japan
- DAX Futures: Indicating +5 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/biotech/retail/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges and some of my (EEM) short
- Market Exposure: Moved to 50% Net Long
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +3.16% 2) Biotech +2.50% 3) Gaming +2.12%
Stocks Rising on Unusual Volume:
- SONC, ALKS, GEVA, OVTI, HALO, CPB, GBX, RMTI, LOCK, LEN, ISIS and LOCO
Stocks With Unusual Call Option Activity:
- 1) SC 2) ARNA 3) INFN 4) SLXP 5) MTG
Stocks With Most Positive News Mentions:
- 1) LMT 2) SONC 3) MDT 4) FSLR 5) MU
Charts:
Evening Headlines
Bloomberg:
- Euro-Area Prices Seen Falling as Risk of Deflation Spiral Mounts. Consumer prices in the euro area probably
fell for the first time in more than five years last month,
pushing the European Central Bank closer to adding stimulus as it battles to revive inflation. Prices
dropped an annual 0.1 percent in December, according to the median
forecast of economists in a Bloomberg survey. That would be the first
decline since October 2009.
- Shorts in Tokyo Soars to Record on Abenomics Skepticism. Bearish
bets on Japanese stocks surged to a
record because foreign investors are increasingly skeptical that
Prime Minister Shinzo Abe will succeed in reviving the world’s
third-biggest economy, said Reorient Group Ltd. Short-selling of shares
on the Tokyo Stock Exchange accounted for 37.8 percent of trading value
yesterday, the highest ratio since the bourse began keeping daily
records in 2008. The Topix index sank 2.9 percent yesterday. Investors
pulled $245 million out of the biggest U.S.-listed exchange-traded fund
that tracks Japanese shares on Jan. 5, the second-largest daily outflow
since May 2013, data compiled by Bloomberg
show.
- There's a Leadership Crisis in Chinese Property Firms -- They're Defaulting. Who's Next to Go? The loan default by Kaisa Group Holdings Ltd., after the second
surprise exit of a Chinese property tycoon in six months, is prompting
investors to ask who’s next. The 2019 notes from the builder,
based in the southern city of Shenzhen, have tumbled 38.4 cents on the
dollar to a record low of 25.3 cents, after the resignation of the
developer’s chairman triggered a loan default Dec. 31. The perpetual
securities of Agile Property Holdings Ltd. dropped 17 cents to 67 since
its billionaire chairman was placed under control of prosecutors in
September before being released last month without details of the
detention. China’s junk dollar notes have lost 3.9 percent in 2015, the worst start to a year ever in Bank of America Merrill Lynch indexes, after Kaisa Chairman Kwok Ying Shing resigned days after two other executives left their
positions. Developers that rely on personal relations in securing land
from the government are among the most at risk from President Xi
Jinping’s local-government financing shakeup and anti-graft drive.
- Asian Stocks Extend Drop, Led by Energy Companies on Oil Plunge.
Asian stocks fell, after yesterday sinking the most in nine months, as
U.S. equities extended declines and the slump in crude oil deepened. The
MSCI Asia Pacific Index (MXAP) declined 0.3 percent to 134.57 as of
9:03 a.m. in Tokyo, with energy companies dropping the most. The
Asian gauge slumped 1.7 percent yesterday and the Standard &
Poor’s 500 Index fell for a fifth day, extending the longest losing
streak in 13 months. West Texas Intermediate oil sank below $48 a barrel
in New York amid speculation data on U.S. supplies today will fuel
concern over a global glut. “With the U.S. markets again under pressure,
the lead for Asia looks bleak,” Evan Lucas, a markets strategist in
Melbourne at IG Ltd., wrote in an e-mail to clients today. “Until oil
finds bottoms, the markets will remain in a downward trajectory.” Japan’s Topix index dropped 0.5 percent. Short-selling on the Tokyo Stock Exchange reached 37.8 percent of total trading
value yesterday, the highest since at least October 2008, when
bourse data became available.
- Copper, Aluminum Hold Losses as Oil’s Slump Fuels Growth Concern. Copper held near a four-year low while
aluminum languished near the weakest in seven months on fears
oil’s slump signals a slowdown in economic growth and weaker
commodities demand. Oil in New York traded near $48 a barrel and the euro area is poised to post its first drop in consumer prices since 2009,
fueling pessimism over the global economy.
- Obama Picks Ex-Bank of Hawaii CEO Landon to Be Fed Governor.
President Barack Obama plans to nominate Allan Landon, the former
chief executive officer of Bank of Hawaii Corp. (BOH), to be a Federal
Reserve governor after months of pressure to select a policy maker with
community banking
experience.
Wall Street Journal:
- Deep Debt Keeps Oil Firms Pumping. Producers Have Increased Their Borrowings by 55% Since 2010. American oil and gas companies have gone heavily into debt during the
energy boom, increasing their borrowings by 55% since 2010, to almost
$200 billion. Their need to service that debt helps explain why
U.S. producers plan to continue pumping oil even as crude trades for
less than $50 a barrel, down 55% since last June. But signs of strain
are building in the oil patch, where revenue growth hasn’t kept pace.
MarketWatch.com:
Zero Hedge:
Business Insider:
Telegraph:
Bild:
- German Govt Preparing for Possible Greek Euro Exit. Chancellery
sees risk of bank collapse in the event of possible election of leftwing
alliance Syriza, citing government officials. If alliance wins and
cancels reform program, final installment of EU10b in aid won't be
transferred to Athens. Concern that if Greece leaves the euro, there may
be a customer deposit run to secure euros that could lead to a banking
collapse and possibly oblige the European banking union to spend
billions.
National:
- Oil
Oversupply Could Take Years to Fix, Mazrouei Says. Oversuppy in crude
markets "needs time to be absorbed," U.A.E. Energy Minister Suhail Al
Mazrouei says. Oil prices could see correction this year, depending on production growth from non-OPEC members; oversupply could take "months or years" to be absorbed depending on reaction from non-OPEC producers. UAE not changing oil industry development plans due to crude price fluctuations; plans to boost country's output to 3.5m b/d under way, won't be changed.
Evening Recommendations
Cowen:
- Rated (JWN) Outperform, target $91.
- Rated (SIG) Outperform, target $150.
Night Trading
- Asian equity indices are -.25% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 123.50 +8.5 basis points.
- Asia Pacific Sovereign CDS Index 74.25 +3.75 basis points.
- NASDAQ 100 futures +.26%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:15 am EST
- The ADP Employment Change for December is estimated at 225K versus 208K in November.
8:30 am EST
- The Trade Deficit for November is estimated at -$42.0B versus -$43.4B in October.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+911,110 barrels versus a -1,754,000 barrel decline the prior week.
Gasoline supplies are estimated to rise by +3,666,670 barrels versus a
+2,951,000 gain the prior week. Distillate inventories are estimated to
rise by +1,972,220 barrels versus a +1,874,000 barrel gain the prior
week. Finally, Refinery Utilization is estimated to fall -.04% versus a
+.9% gain the prior week.
2:00 pm EST
- Fed Minutes from 12/17 meeting.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Evans speaking, Eurozone CPI, China Trade Balance, weekly MBA
mortgage applications report, Goldman Sachs Energy Conference, (LLY)
guidance call and the (ROVI) analyst day could also 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 modestly higher and to weaken 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: Almost Every Sector Declining
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 22.52 +13.4%
- Euro/Yen Carry Return Index 147.59 -1.03%
- Emerging Markets Currency Volatility(VXY) 10.71 -.46%
- S&P 500 Implied Correlation 71.07 +4.78%
- ISE Sentiment Index 66.0 -2.94%
- Total Put/Call 1.21 +2.54%
Credit Investor Angst:
- North American Investment Grade CDS Index 71.05 +2.45%
- America Energy Sector High-Yield CDS Index 700.0 +4.99%
- European Financial Sector CDS Index 71.48 +3.65%
- Western Europe Sovereign Debt CDS Index 28.45 +5.0%
- Asia Pacific Sovereign Debt CDS Index 74.66 +5.89%
- Emerging Market CDS Index 385.67 +1.92%
- China Blended Corporate Spread Index 359.04 +3.88%
- 2-Year Swap Spread 23.0 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.75 +1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +1.0 basis point
- Yield Curve 132.0 -5.0 basis points
- China Import Iron Ore Spot $71.49/Metric Tonne +.87%
- Citi US Economic Surprise Index 22.80 -4.8 points
- Citi Eurozone Economic Surprise Index 10.90 -1.5 points
- Citi Emerging Markets Economic Surprise Index -13.90 +.4 point
- 10-Year TIPS Spread 1.58 -7.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -243 open in Japan
- DAX Futures: Indicating -21 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Gaming -3.01% 2) Road & Rail -2.63% 3) Alt Energy -2.47%
Stocks Falling on Unusual Volume:
- IDTI, ZION, WATT, KORS, KITE, QGEN, CEMP, SSL, WBAI, AAVL, PVH, URI, CLDN, GPC, IOC, PLOW, GEVA, HEES, DEO, WTW, CNSL, VRNS, OCN, IMKTA, IPHI, SE, PLOW, NSC, MDCO, RDUS, CSX, CMC, HTH, ARCB, PVH, NDLS, HLX, CYBX, ISIS, VNCE, NBIX, GEVA and ICPT
Stocks With Unusual Put Option Activity:
- 1) EA 2) CBS 3) CREE 4) CSX 5) AKS
Stocks With Most Negative News Mentions:
- 1) KORS 2) CSX 3) FFIV 4) URI 5) CAT
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gold & Silver +3.12% 2) Steel +2.34% 3) Utilities +1.76%
Stocks Rising on Unusual Volume:
- AOL, ALKS, LOCO, EBIX and BLUE
Stocks With Unusual Call Option Activity:
- 1) HBAN 2) ACAS 3) AEO 4) INFN 5) HL
Stocks With Most Positive News Mentions:
- 1) WAG 2) STZ 3) HUM 4) SLXP 5) CNC
Charts:
