Style Underperformer:
Sector Underperformers:
- 1) Hospitals -1.85% 2) Coal -1.25% 3) Oil Tankers -1.22%
Stocks Falling on Unusual Volume:
- HLSS, AIV, ANW, BRX, ASPS, TFM, BGFV, WWW, RESI, GT, DFRG, TIF, FMI, PII, ISRG, BKE, CUDA, BITA, ATHM, NSM, BIS, FCX, SNN, VMI and RESI
Stocks With Unusual Put Option Activity:
- 1) XLV 2) KBH 3) WFC 4) DXJ 5) CSX
Stocks With Most Negative News Mentions:
- 1) WWW 2) JUNO 3) ECOM 4) OCN 5) FIVE
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Airlines +2.32% 2) Gaming +2.31% 3) Homebuilders +2.08%
Stocks Rising on Unusual Volume:
- PCYC, QLGC, IHS, DXCM, SPWR, SEM, ACOR, CLVS and WBMD
Stocks With Unusual Call Option Activity:
- 1) ALTR 2) LVLT 3) DNKN 4) PCL 5) FOXA
Stocks With Most Positive News Mentions:
- 1) BBY 2) CMA 3) CELG 4) AMZN 5) BA
Charts:
Evening Headlines
Bloomberg:
- Charlie Hebdo To Print 3 Million Copies With Muhammad Cover.
Charlie Hebdo will print 3 million copies of a special issue of the
satirical magazine, depicting the Prophet Muhammad on the cover, a week
after an attack at its headquarters left a third of its journalists
dead. Publishers of the weekly magazine will put the copies on
newsstands worldwide in 16 languages on Jan. 14. The issue will
feature a cartoon of Muhammad, crying, on a green background,
holding a board saying “Je suis Charlie” or “I am Charlie.”
Above his image is written “All is Forgiven.”
- Chinese Car Dealers Find Days of ‘Printing Money’ Ending. China’s
car dealers are in open revolt over industry practices that have
slashed profits, threatening growth prospects for companies such as
General Motors Co. and Volkswagen AG in the world’s biggest auto market.
Retailers are banding together under the state-backed China Automobile Dealers Association to demand lower sales targets and
a bigger share of profit from vehicle sales. Bayerische Motoren
Werke AG’s agreement last week to pay 5.1 billion yuan ($820
million) to its dealers has emboldened distributors for VW and
Toyota Motor Corp. to demand similar concessions.
- China’s $300 Billion Errors May Mask Fund Outflows, Goldman Says.
Growing error items in China’s balance of payments may reflect a pickup
in hidden cash transfers from the nation and the central bank will
likely favor a stable yuan to prevent outflows quickening, Goldman Sachs
Group Inc. said. Net errors and omissions, an accounting fix used to
plug the gap when official records of cross-border flows don’t balance,
was negative by more than $300 billion since 2010, Goldman Sachs
economists MK Tang and Maggie Wei wrote in a note
today. That included a record $63 billion in the third quarter
of 2014, a year in which yuan sentiment soured and President Xi
Jinping’s anti-corruption drive widened. “Since such outflows may be harder to contain with
regulations, a continuation of their recent acceleration could
start posing tangible financial stability concerns,” Tang and
Wei wrote in the note.
- Yen’s Top Forecaster Halts Sell Call as Oil Cuts Japan Deficit. The
best forecaster on the yen says he
hasn’t recommended selling the Japanese currency in a few months as
lower oil prices provide solace for Japan’s deteriorating trade balance.
Jens Nordvig, managing director of currency research at Nomura Holdings
Inc., said the 45 percent slump in oil since the end of October will
trim Japan’s trade deficit by around $500
million. The deficit was at 894 billion yen ($7.6 billion) in
November, a 29th straight month of shortfall. “We’ve had a couple years
where we’ve been very focused on
trading the yen from the short side, but we actually haven’t
been short for quite a few months,” Nordvig said in an
interview today. Low “oil prices are positive for Japan’s trade
balance.”
- Japan Boosts Defense Spending to Counter China’s Island Claims.
Japan will increase defense spending for a third straight year as Prime
Minister Shinzo Abe seeks to counter China’s claims to remote islands
in the East China Sea. The budget for the year starting April will be 4.98 trillion yen ($42 billion), up from 4.84 trillion yen in fiscal
2014, according to documents obtained by Bloomberg. Spending on
defense will account for about 5 percent of the national budget,
which is set to be approved by the cabinet tomorrow.
- Short Sellers Bet Korean Shipyards’ Misery to Deepen. South Korean shipbuilders, last year’s
biggest stock-market losers, are the most popular target for short sellers in 2015 as falling crude hurts oil-rig demand.
Bearish wagers used borrowed stock against Hyundai Mipo Dockyard Co.
(010620) rose to 7.3 percent of shares outstanding on Jan. 8, the
highest level on the Kospi index and up from 4.3 percent a year ago,
according to data compiled by Bloomberg and Markit Group Ltd. Short
interest in Daewoo Shipbuilding & Marine Engineering Co. and Hyundai
Heavy Industries Co. (009540) has more than
tripled in the past 12 months.
- Draghi Faces Legal Test on Bond Buys as ECB Readies QE Plan.
European Central Bank President Mario Draghi will get a legal readout
tomorrow on a predecessor to the quantitative easing plan that he’s set
to reveal later this month. An adviser to the EU Court of Justice will
say whether the European Central Bank’s Outright Monetary Transactions
program overstepped the law in a non-binding opinion that may signal
whether QE must also be reined in. “If the opinion is favorable and the conditions attached
are not too restrictive, it would open the way to QE by the ECB
right now,” said Pierre-Henri Conac, a professor of financial-markets law at the University of Luxembourg.
- Global PC Shipments Fall 2.4% in Fourth Quarter, IDC Says. Worldwide personal-computer shipments
dropped 2.4 percent in the fourth quarter as demand from
businesses for new machines waned, market researcher IDC said. The decline was less than the 4.8 percent fall that IDC had
projected for the quarter, the firm said today in a statement.
PC sales totaled 80.8 million for the quarter, down from 82.2
million units a year earlier.
- Asian Stocks Decline as Oil Slumps, Yen Drags Japan Shares Lower.
Asian stocks fell as oil at a 5 1/2 year low weighed on energy
companies and a stronger yen and declines in U.S. equities dragged down
Japanese shares as the market opened after a holiday. The MSCI Asia
Pacific Index (MXAP) slipped 0.4 percent to 137.32 as of 9:01 a.m. in
Tokyo, before markets opened in Hong Kong and China.
- U.A.E. Sticks With Oil Output Boost Even as Prices Drop. The United Arab Emirates will stick with a
plan to increase oil-production capacity to 3.5 million barrels
a day in 2017 even as an oversupply pushed prices to the lowest in more than five years.
“In this time of unstable oil prices, we are showing in Abu Dhabi and
across the country that we remain dedicated to reach our long-term
production goals,” Energy Minister Suhail Al Mazrouei said in a
presentation in Abu Dhabi yesterday. “Our
investments remain there.”
- Fed’s Williams Says June Rate Rise ‘Reasonable’ Amid Labor Gains. Federal
Reserve Bank of San Francisco President John Williams, who will vote on
policy this year, said raising interest rates in June would be a close
call amid “strong momentum” in the labor market and weaker wage gains. “I would expect by June that the argument pro
and con for lifting off rates will be probably a close call” assuming
that inflation doesn’t fall further, Williams said today in a telephone
interview from his San Francisco office. “It’s a reasonable guess.”
Wall Street Journal:
- France Hunts for Attack Accomplices. Prime Minister Warns of Continued Threats After Attack on Charlie Hebdo and Other Violence. France dispatched thousands of police and troops to protect synagogues
and Jewish schools as investigators searched for possible accomplices to
the militants behind last week’s terror attacks and warned of more
threats.
- As Oil Slips Below $50, Canada Digs In for Long Haul. Oil-Sands Operators, Seeing Long-Term Value, Aren’t Likely to Shut Off the Tap Any Time Soon. Even as oil prices settled below $50 a barrel Monday for the first time
in nearly six years, those companies are unlikely to shut off the tap
anytime soon thanks to those huge upfront costs, combined with long-term
break-even points and lengthy production lives. Unlike shale oil, which
requires constant drilling of new wells to maintain output levels, once
an oil-sands site is developed it will produce tens or hundreds of
thousands of barrels a day, steadily, for up to three decades.
Fox News:
- Paris attacks prompt fears France's Muslim 'no-go' zones incubating jihad. (video) In hundreds of French "no-go" zones -- neighborhoods where neither
tourists nor cops dare enter -- poor and alienated Muslims have
intimidated the government into largely ceding authority over them,
prompting fears that the kind of jihad that gave rise to last week's
attack in Paris is festering unchecked.
MarketWatch.com:
CNBC:
- Citadel beats markets with big year. In a year where many hedge funds posted unimpressive returns, Citadel,
the Chicago money-management giant known for its swift movement and
out-of-stock positions, generated more than 23 percent returns in its
equity hedge fund and almost 18 percent in its multi-strategy flagship
funds, Kensington and Wellington, according to someone who reviewed the numbers.
Zero Hedge:
Business Insider:
Reuters:
- Cutting 'patient' from Fed guidance should signal hike near: Lacker. The Federal
Reserve should stop talking about the need for a "patient" interest rate
policy just before it thinks it will begin hiking rates, a top Fed
policymaker said on Monday.
Richmond Federal Bank
President Jeffrey Lacker said in an interview with Reuters that the
Fed's guidance in December that it would be patient with raising rates
harkened back to a strategy employed in 2004.
- German anti-Islamist rally swells after attacks in France. A record 25,000
anti-Islamist protesters marched through the east German city of Dresden
on Monday, many holding banners with anti-immigrant slogans, and held a
minute's silence for the victims of last week's attacks in France. Chancellor Angela Merkel
and other senior German politicians have called for people to stay away
from rallies organised by PEGIDA, or Patriotic Europeans Against the
Islamisation of the West - people who Merkel has said have "hatred in
their hearts".
- United Airlines considers outsourcing jobs at 28 U.S. airports. United Airlines is assessing
whether to outsource jobs at airports around the country in a
cost-cutting effort that could impact some 2,000 workers.
The Chicago-based carrier informed employees Monday that
jobs up for review included baggage handlers and gate and
customer service agents at 28 airports that are not hubs,
ranging from Atlanta to Anchorage. It has yet to make any
decisions.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 120.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 74.75 +1.0 basis point.
- NASDAQ 100 futures +.14%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
9:00 am EST
- The NFIB Small Business Optimism Index for December is estimated to rise to 98.5 versus 98.1 in November.
10:00 am EST
- The IBD/TIPP Economic Optimism Index for January is estimated to rise to 48.7 versus 48.4 in December.
- JOLTS Job Openings for November are estimated to rise to 4850 versus 4834 in October.
2:00 pm EST
- The Monthly Budget Statement for December is estimated at $3.0B.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Kocherlakota speaking, $21B 10Y T-Note auction, UK CPI report, US
weekly retail sales reports, Needham Growth Conference, Deutsche Bank
Auto Conference, BMO Energy Forum, JPMorgan Healthcare Conference and
the (MNST) business update could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by consumer and retail 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: Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 19.98 +13.85%
- Euro/Yen Carry Return Index 146.33 -.15%
- Emerging Markets Currency Volatility(VXY) 10.49 +1.45%
- S&P 500 Implied Correlation 65.81 +1.05%
- ISE Sentiment Index 109.0 +43.43%
- Total Put/Call 1.08 +12.5%
Credit Investor Angst:
- North American Investment Grade CDS Index 70.80 +2.08%
- America Energy Sector High-Yield CDS Index 712.0 +1.3%
- European Financial Sector CDS Index 69.47 -1.88%
- Western Europe Sovereign Debt CDS Index 27.88 -4.08%
- Asia Pacific Sovereign Debt CDS Index 74.01 +.22%
- Emerging Market CDS Index 393.16 +3.85%
- China Blended Corporate Spread Index 366.63 +.31%
- 2-Year Swap Spread 22.75 -.75 basis point
- TED Spread 23.75 +.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -14.25 unch.
Economic Gauges:
- 3-Month T-Bill Yield .02% unch.
- Yield Curve 136.0 -4.0 basis points
- China Import Iron Ore Spot $70.30/Metric Tonne -1.24%
- Citi US Economic Surprise Index 30.80 +.1 point
- Citi Eurozone Economic Surprise Index .1 -.7 point
- Citi Emerging Markets Economic Surprise Index -16.20 +.7 point
- 10-Year TIPS Spread 1.57 -5.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -283 open in Japan
- DAX Futures: Indicating -25 open in Germany
Portfolio:
- Higher: On gains in my biotech/medical sector longs, index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- French Attacks Prompt East Europe Calls for Curbs on Immigration. Hungary’s
prime minister and the Czech president demanded a tougher stance on
immigrants to the European Union as fallout from the terrorist attacks
in France last week spread to former communist countries. Hungarian
Prime Minister Viktor Orban said the EU must limit immigration to people
seeking political asylum. Czech President Milos Zeman said the foreign
incomers and their
descendants who can’t adapt and follow local norms should “return home,”
according to an interview published in Denik newspaper Jan 10. “Immigration
is a bad thing,” Orban said yesterday on Hungarian public television
after attending a march in Paris to mark the killings in France. “We
shouldn’t view it as if it had any use because it only brings problems
and peril to Europeans and so it must be stopped.”
- Top Russian Ruble Forecaster Sees Fresh Run at Record Low. The world’s top ruble forecaster is
unimpressed by the currency’s 30 percent rebound from a record
low. The analyst -- Danske Bank A/S’s Vladimir Miklashevsky --
says the ruble could be testing new lows again this quarter as
the plunge in oil, Russia’s top export, threatens to cost the country its investment-grade credit ratings and turns Russians
away from their currency. The ruble traded at 62.32 per dollar
at 2:35 p.m. in Moscow, after reaching 80.1 on Dec. 16, the
weakest on record.
- Ukraine Eurobonds Drop as Goldman Sees More Than 70% Haircut. Ukraine’s
foreign-currency borrowing costs rose for a second day as Goldman Sachs
Group Inc. (GS) said a debt writedown may erase 70 percent of the
bonds’ value and Russia said it may demand the early repayment of a $3
billion bond. Ukraine’s dollar-denominated debt maturing July 2017 fell
2.7 cents to 59.87 cents on the dollar by 6:52 p.m. in Kiev
after rising 2.2 cents last week as the European Union pledged
further financial aid. The yield on the notes rose 229 basis
points to 34.20 percent, nearing the record 36.10 percent
reached last week.
- Greek Contagion Concerns Attract Bears to Spain, Italy.
Traders are buying up protection should Greece’s potential exit from
the euro trigger a domino drop in Spanish and Italian stocks. Investors
are pulling out of exchange-traded funds tracking the equities, while
driving up costs to
hedge against declines. The price of bearish options versus bullish ones
on the iShares MSCI Spain Capped ETF hit a 20-month high last week,
while the cost of the contracts on the iShares MSCI Italy Capped ETF
jumped 27 percent since early December, according to data compiled by
Bloomberg.
- Emerging Energy Stocks Drop on Goldman Oil Outlook; Real Weakens. Emerging-market stocks fell, ending a three-day advance, as oil’s
plunge below $48 a barrel dragged down energy companies from Russia to India. The
real fell from a one-month high as economists cut their growth
forecasts for Brazil. OAO
Rosneft slid 1.3 percent in Moscow. Reliance Industries Ltd., India’s
largest oil refinery, decreased 1.2 percent. Coal India Ltd. dropped 4.6
percent after reports the government will sell shares in the company.
Stocks in net oil importers Turkey and Egypt climbed. The ruble weakened
2.3 percent after Fitch Ratings Ltd. cut Russia’s credit rating. The
MSCI Emerging Markets Index decreased 0.6 percent to 955.48 at 10:51
a.m. in New York.
- Europe Stocks Rise as Health-Care Gains Offset Energy. European stocks advanced for the third time in four days, pushed higher by drugmakers and Greek equities. The
Stoxx Europe 600 Index added 0.6 percent to 339.87 at the close of
trading in London, after earlier climbing as much as 1.1 percent and
falling 0.4 percent. Roche Holding AG helped send health-care
companies up 0.9 percent, and Greece’s ASE Index climbed 3.8 percent,
completing its biggest two-day rally since November. The broad European benchmark gauge fell 1 percent last week for a second decline, posting its worst start to a year since 2008.
- Copper Falling to 5-Year Low Defies Forecasts for Better Economy. Economists say the world economy will do
better this year. The copper market is saying that won’t be
enough to eliminate a supply glut that’s lasted at least two
years. Prices of the metal slumped to the lowest since October 2009
today, fueled by concerns that output is outpacing demand. China’s
copper consumption will grow at the slowest pace since at least 2010,
Deutsche Bank AG predicts. At the same time,
global economic growth will be the best in four years, economist
estimates compiled by Bloomberg show.
- Oil Falls to 5 1/2-Year Low; Goldman, SocGen Cut Price Outlook. West Texas Intermediate decreased as much as 5.1 percent to $45.90 a
barrel, and Brent 5.9 percent to $47.18. Crude has to “stay lower
for
longer” if investment in shale is to be curtailed to re-balance the
global market, according to Goldman analysts. Prices need to return to
$100 a barrel for economic equilibrium, Venezuelan President Nicolas
Maduro said in Iran during a tour of Middle Eastern OPEC members.
- Oil Whacks S&P 500 Earnings Growth. Forecasts for first-quarter profits in the Standard & Poor’s 500
Index have fallen by 6.4 percentage points from three months ago, the
biggest decrease since 2009, according to more than 6,000 analyst
estimates compiled by Bloomberg. Reductions spread across nine of 10
industry groups and energy companies saw the biggest cut. Earnings
pessimism is growing just as the best three-year rally since the
technology boom pushed equity valuations to the highest level since
2010.
- Shale Drillers Can Brag About Their Holdings. Investors Ask: How's Your Debt? U.S. shale drillers may tout how much oil they have in the ground or
how cheaply they can get it out. For stock investors, what matters most
is debt. The worst performers among U.S. oil producers in a
Bloomberg index owe about 5.7 times more than they earn, before certain
deductions, compared with 1.7 times for companies that have taken less
of a hit. Operations, such as where the companies drill or how much oil
versus gas they pump, matter less.
- Utah Mall’s Travails Expose Property Weak Link: Mortgages.
“There’s a level of complacency among investors,” he
said. “Competitive pressures that haven’t been seen in decades
are making some retailers and some properties obsolete.” Even as U.S. real estate prices surpass their November 2007
peak, neighborhood shopping centers, malls and other retail
properties remain 15 percent below their record, according to
indexes compiled by Moody’s and Real Capital Analytics Inc.
Retail is the only major type of commercial real estate, which
also includes office buildings and warehouses, that failed to
achieve price growth of at least 10 percent in the 12 months
through November.
- Tiffany(TIF) Shares Tumble After Jeweler Cuts Annual Forecast. Tiffany & Co. (TIF) shares fell the most in more than three years after a sluggish holiday season spurred the luxury jewelry chain to cut its annual forecast. Sales in November and December declined 1 percent to $1.02
billion worldwide, the New York-based company said today in a
statement. Currency fluctuations and a continued slump in Japan
took a toll on the results, along with a surprise slowdown in
its home market.
Wall Street Journal:
- Islamic State Adds to Terror In Afghanistan. Raises Prospect of Battling Jihadists, Rising Terrorism. Adherents of Islamic State this weekend declared their intention to step
up operations in Afghan territory where the Taliban have long held
sway, raising the prospect of battling jihadist groups and rising
terrorism in the region.
Barron's:
Fox News:
ZeroHedge:
Business Insider:
Reuters:
Financial Times:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Oil Tankers -5.23% 2) Oil Service -4.05% 3) Disk Drives -3.20%
Stocks Falling on Unusual Volume:
- TIF, SNDK, GMLP, BITA, LORL, NLS, FDO, THC, SRPT, ACM, DG, DFRG, SJT, SWN, TYG, GCO, KMF, SCHN, HBHC, MU, HUBG, TEP, IOC, IMKTA, ARUN and THC
Stocks With Unusual Put Option Activity:
- 1) JIVE 2) TIF 3) VLO 4) SNDK 5) LRCX
Stocks With Most Negative News Mentions:
- 1) ARUN 2) SNDK 3) PBR 4) TIF 5) AAL
Charts:
