Style Underperformer:
Sector Underperformers:
- 1) Oil Service -4.52% 2) Oil Tankers -2.51% 3) Energy -1.88%
Stocks Falling on Unusual Volume:
- ETH, OTEX, IRE, SYRG, RDWR, ACAT, VMW, EZPW, GNTX, INFA, RMAS, EAT, FTK, CVLT, PPC, LXK, COG, AOL, FGP, MBLY, NOAH, WWE, ZU, IMO, RYAM, CRS, DVAX, NOV, MTOR, FTK and PPC
Stocks With Unusual Put Option Activity:
- 1) OAS 2) BRK/B 3) MA 4) VMW 5) HOG
Stocks With Most Negative News Mentions:
- 1) FCX 2) PBR 3) GT 4) AOL 5) NOV
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Networking +.79% 2) Computer Hardware +.69% 3) Defense +.38%
Stocks Rising on Unusual Volume:
- ABMD, FSL, COMM, TUP, X, EA, AAPL, TSS, BA and JNPR
Stocks With Unusual Call Option Activity:
- 1) IDTI 2) HRB 3) EPI 4) OPK 5) LOCK
Stocks With Most Positive News Mentions:
- 1) ABMD 2) FSL 3) LUV 4) AAPL 5) X
Charts:
Evening Headlines
Bloomberg:
- Sanctions Aren't Enough to Stop Putin, and He Knows It. The
European Union wants to tighten sanctions on Russia again, as renewed
fighting in eastern Ukraine causes heavy casualties and raises fears
that Russian-backed separatists will seize control of more territory. The
EU, in a statement issued today, said it saw "evidence of continued and
growing support given to the separatists by Russia, which underlines
Russia's responsibility" for the
bloodshed. On Jan. 29, EU foreign ministers are expected to
consider widening a list of Russians and separatist leaders facing visa
bans and asset freezes.
-
Banks Decline as Stress Tests Heighten Concern: China Overnight.
Chinese banks retreated in New York amid concern credit risks may
increase for lenders as a housing market slowdown in the Asian nation
constrains their ability to recover their advances. Industrial and
Commercial Bank of China Ltd., the world’s largest lender by assets,
fell 2.7 percent to $14.66 in over-the-counter trading, the biggest drop
in seven weeks. China Construction Bank Corp. (939) and Bank of China
Ltd. each slipped at
least 2 percent. The Bloomberg China-US Equity Index declined
1.7 percent to 113.70 after four days of gains.
- China Accuses Alibaba(BABA) of Lax Oversight of Merchants. Alibaba Group Holding Ltd. failed to
properly oversee merchants and allowed the sale of counterfeit
products on its e-commerce platforms, according to a Chinese
government report. Many merchants didn’t apply for a business license and
misled consumers during holiday promotions, including the Nov.
11 Singles’ Day, according to a document published by a media
outlet run by the State Administration for Industry & Commerce.
A meeting was held in July, though the report wasn’t published
until now to avoid affecting Alibaba’s initial public offering,
it said.
- Singapore Dollar Is Weakest Since 2010 on Monetary Policy Shift. Singapore’s central bank unexpectedly eased
monetary policy, sending the currency to the weakest since 2010
as the country joined global policy makers in shoring up growth
amid dwindling inflation. The Monetary Authority of Singapore, which uses the
currency as its main policy tool, said it will reduce the slope
of the policy band for the island’s dollar in an unscheduled
policy statement Wednesday. It also cut the inflation forecast
for 2015, predicting prices may fall as much as 0.5 percent.
- Asian Stocks Slide From Four-Month High as Japan Retreats on Yen. Asian stocks fell, with the regional
benchmark index retreating from a four-month high, as Japanese
shares slid on a stronger yen and U.S. earnings and durable-goods orders disappointed investors.
The MSCI Asia Pacific Index declined 0.4 percent to 141.81
as of 9:00 a.m. in Tokyo after climbing yesterday to its highest
close since Sept. 25. Japan’s Topix index slid 0.7 percent.
- Goldman(GS) Downgrades Commodity Outlook as Energy, Metals Tumble. Goldman Sachs Group Inc. downgraded its
three-month commodity outlook to underweight as mounting global
supply gluts sent energy and metals prices tumbling this year. There
is a greater risk that raw material prices may drop
in the near term than rise, Goldman strategists and analysts including
Christian Mueller-Glissmann, Peter Oppenheimer and Jeffrey Currie wrote
in a research report. The Bloomberg Commodity Index of 22 components
reached a 12-year low this
week, with crude oil, hogs and copper leading losses in 2015.
- Crude at $49 Sinks Big Oil Growth Prospects as Profits Falter. Financial results from a fourth quarter that
saw the collapse of the crude market will provide a window into
how the world’s biggest oil companies are adjusting to a new
reality of slowing growth and low prices. Oil that topped $115 a
barrel as recently as June has been
trading below $50 a barrel since the first week of the year,
portending a bleak 2015 for the world’s five so-called supermajors --
Exxon Mobil Corp., Royal Dutch Shell Plc (RDSA), Chevron Corp., Total SA
(FP) and BP Plc. (BP/) The companies, whose businesses combine oil and
natural gas exploration with refining and chemical manufacturing, have
historically been among the most
resilient players during down cycles. This could be the oil bust that
breaks that pattern.
- Get Ready for the Return of Risky-Mortgage Bonds: Credit Markets. The business of bundling riskier U.S.
mortgages into bonds without government backing is gearing up
for a comeback. Just don’t call it subprime. Hedge fund Seer Capital Management, money manager Angel Oak
Capital and Sydney-based bank Macquarie Group Ltd. are among
firms buying up loans to borrowers who can’t qualify for
conventional mortgages because of issues such as low credit
scores, foreclosures or hard-to-document income. They each plan
to pool the mortgages into securities of varying risk and sell
some to investors this year. JPMorgan Chase & Co. analysts
predict as much as $5 billion of deals could get done, while
Nomura Holdings Inc. forecasts $1 billion to $2 billion.
Wall Street Journal:
- Overseas Forex Trades Laid FXCM Low. Big Bets by Customers Who Aren’t Subject to U.S. Rules Stung Firm. Retail foreign-exchange broker FXCM Inc. was nearly felled by outsize
bets made by foreign customers who aren’t subject to U.S. regulations,
according to people familiar with regulators’ review of the firm.
- Investors Rethink Taking a Leap Into Junk Bin. Slowdown in Debt Sales Comes Amid Concerns About Pace of Economic Growth. U.S. junk-bond investors are showing fresh caution, renewing concerns of
a wholesale retreat that could hobble financing for low-rated companies
and hamstring the economic recovery.
- President Costanza’s Jobs Boom. A new study shows that Mr. Obama needs a ‘Seinfeld’ epiphany. In a 1994 “Seinfeld” episode, George realizes that “every decision that I
have ever made in my entire life has been wrong. My life is the
complete opposite of everything I want it to be.” Jerry replies: “If
every instinct you have is wrong, then the opposite would have to be
right.”
Fox News:
- Obama drops plan to end tax breaks for popular college savings accounts. (video) President Obama has dropped his plan to end tax breaks for popular
college savings accounts known as 529s, sources told Fox News on
Tuesday. The decision comes in the wake of stern criticism from Republicans
and pleas from top Democrats, including House Minority Leader Nancy
Pelosi, to drop the plan.
CNBC:
- Apple(AAPL) posts blowout quarter, will ship Watch in April. (video)
Apple reported a blockbuster quarter on Tuesday, blowing past Wall
Street's most optimistic expectations. The company sold almost 9 million
more iPhones
than expected, while its cash pile ballooned to the point that it could
buy about 480 of the S&P 500 companies outright. Apple also revealed
during a conference call with
analysts that it plans to ship its new Apple Watch wearable device in
April of this year. Shares rose 5 percent in after-hours trading.
- Yahoo(YHOO) to spin off its remaining Alibaba stake. Yahoo on Tuesday said it would spin off its remaining Alibaba stake in a tax-free deal. The stock jumped more than 7 percent after the announcement. Yahoo's 384 million shares of Alibaba, valued at $40 billion, will be wrapped into a newly formed independent entity, SpinCo.
Zero Hedge:
Business Insider:
Telegraph:
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 110.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 70.5 +1.75 basis points.
- NASDAQ 100 futures +1.17%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+4,000,000 barrels versus a +10,071,000 barrel gain the prior week.
Gasoline supplies are estimated to rise by +610,000 barrels versus a
+588,000 barrel gain the prior week. Distillate inventories are
estimated to fall by -1,530,000 barrels versus a -3,272,000 barrel gain
the prior week.
2:00 pm EST
- The FOMC is expected to leave the benchmark Fed Funds rate at .25%.
Upcoming Splits
Other Potential Market Movers
- The
German Consumer Confidence Index, $26B 2Y T-Note auction, weekly MBA
Mortgage Applications report and the (KMI) analyst meeting could also
impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and consumer shares in the region. I expect US stocks to open modestly higher and to maintain gains into the afternoon. 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) 17.19 +10.79%
- Euro/Yen Carry Return Index 139.78 +.57%
- Emerging Markets Currency Volatility(VXY) 10.07 -.20%
- S&P 500 Implied Correlation 66.82 +2.34%
- ISE Sentiment Index 106.0 +45.21%
- Total Put/Call 1.05 +16.67%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.97 +1.80%
- America Energy Sector High-Yield CDS Index 739.0 +1.84%
- European Financial Sector CDS Index 59.78 +4.03%
- Western Europe Sovereign Debt CDS Index 23.67 +.38%
- Asia Pacific Sovereign Debt CDS Index 70.51 +1.13%
- Emerging Market CDS Index 392.78 +.33%
- iBoxx Offshore RMB China Corporates High Yield Index 112.29 +.46%
- 2-Year Swap Spread 25.0 -.25 basis point
- TED Spread 24.0 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -11.75 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +1.0 basis point
- China Import Iron Ore Spot $63.50/Metric Tonne -.06%
- Citi US Economic Surprise Index -3.70 unch.
- Citi Eurozone Economic Surprise Index 0.0 +.4 point
- Citi Emerging Markets Economic Surprise Index -11.0 -.5 point
- 10-Year TIPS Spread 1.65 +4.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -123 open in Japan
- DAX Futures: Indicating +43 open in Germany
Portfolio:
- Slightly Lower: On losses in my tech/medical sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- EU Renews Push for Russian Sanctions; Putin Blames Ukraine. European
Union leaders threatened to tighten sanctions on Russia as soon as
Thursday over its support for pro-Kremlin rebels in eastern Ukraine, who
are engaged in the worst clashes with government troops since a
September truce. The leaders condemned the killing of
dozens of civilians in “indiscriminate shelling” of the Ukrainian port
city of Mariupol and said EU foreign ministers meeting on Jan. 29 will
“consider any appropriate action, in particular on further restrictive
measures,” EU President Donald Tusk said in an e-mailed statement in
Brussels.
- Putin Needles Ukraine as He Shuns Wartime Allies at Auschwitz. As
European leaders and U.S. representatives gathered in Poland to mark
the 70th anniversary of the liberation of the Auschwitz concentration
camp by the Soviet Red Army, Russian President Vladimir Putin skipped
the ceremony to visit the Jewish Museum in Moscow. “The Russian people
bore the main burden of the fight
against Nazism on their shoulders,” Putin said Tuesday in a
speech at the Jewish Museum and Center of Tolerance in Moscow
that included an historical dig at Ukraine.
- Russian Corporate Bonds Fall After S&P Cuts Nation to Junk.
Russian companies led declines in European
corporate bonds after Standard & Poor’s cut the nation’s credit
rating to junk for the first time in a decade. Bonds sold by OAO Russian
Railways and OAO Gazprom were the
worst performing among 1,925 investment-grade securities in Bank
of America Merrill Lynch’s Euro Corporate Index. The state-owned
rail operator’s 1 billion euros ($1.1 billion) of 3.3744 percent
bonds due May 2021 fell 2.1 cents to 70.8 cents while the
natural gas provider’s 1 billion euros of 3.389 percent bonds
due March 2020 dropped 1.7 cents to 84.2 cents.
- Tsipras Names Cabinet Heading for Clash Over Bailout and Russia. Greek Prime Minister Alexis Tsipras unveiled
a cabinet that threatens to maximize friction with other
European Union governments on issues ranging from the country’s
bailout agreement to sanctions on Russia. Yanis Varoufakis, a 53-year-old economics professor, will
handle negotiations with the euro region and International
Monetary Fund over the country’s 240 billion-euro ($273 billion)
bailout, after being appointed finance minister. He has called
it a “trap” that was destructive for Greece. Foreign Minister Nikos Kotzias is due in Brussels on
Thursday to discuss possible additional sanctions on Russia over
the conflict in Ukraine. Before the cabinet even meets for the
first time tomorrow, the Greek government said that it disagreed
with an EU statement in which President Donald Tusk raised the
prospect of “further restrictive measures” on Russia.
- China Private Bond Faces Stress as LGFV Says No Pledge. China’s
private bond market is facing increased scrutiny after a
local-government financing vehicle in the eastern province of Jiangsu
said it has no obligation to guarantee notes sold by a manufacturer. Dongfei Mazuoli Textile Machinery Co., based in the city of
Dongtai, can’t pay principal and interest on the securities as
of Jan. 25, according to a report today on Tencent Holdings
Ltd.’s QQ.com. The LGFV had signed a contract with the
manufacturer in 2012 to guarantee its bond credit ratings, but
doesn’t guarantee the note payments themselves, according to a
statement from the financing unit dated Jan. 26.
- What Clampdown? China Margin Traders Boost Debt to Record.
It didn’t take long for the flood of
borrowed money to come pouring back into Chinese stocks. After a two-day
decline spurred by regulatory efforts to curb margin lending on Jan.
16, the value of shares purchased with borrowed cash has rebounded to
an all-time high. The outstanding balance of margin debt on the
Shanghai Stock Exchange climbed to a record 771.4 billion yuan ($123
billion) yesterday, up from about 751 billion yuan on Jan. 20. China’s suspension of new margin accounts at three of the nation’s biggest brokerages and notice to ban loans to traders
with less than 500,000 yuan has done little to damp the
enthusiasm of leveraged investors.
- Greek Bonds, Stocks Drop as Leaders to Spar on Writedown. Greece’s
bonds and stocks plunged for a second day as the nation’s newly named
cabinet looked set to clash with euro-area finance ministers over its
funding needs. While finance chiefs from the 19-nation euro area on Monday signaled their willingness to do a deal with Greek Prime
Minister Alexis Tsipras, it’s on the condition he drops his
demand for a debt writedown. Representing the Greek side in
negotiations with their international creditors will be finance
minister Yanis Varoufakis, who has argued that Greece should
default while staying a member of the euro area. Greek three-year
yields rose 198 basis points, or 1.98
percentage point, to 14.03 percent at 5 p.m. London time, after
jumping 197 basis points the previous day. The 3.375 percent
notes due in July 2017 fell 3.38, or 33.80 euros per 1,000-euro ($1,132)
face amount, to 78.975. The nation’s 10-year yield increased 38 basis
points to 9.48 percent.
- Boko Haram Attacks Leave at Least 30 Dead in Nigeria’s Northeast. Boko Haram Islamists in Nigeria attacked two
northeastern towns leaving at least 30 people dead and many
injured, a lawmaker said. “They attacked our people in Madagali, Michika and
surrounding villages” yesterday, Adamu Kamale, a member of the
Adamawa state legislature representing the area, said by phone
today from Yola, the state capital. “They destroyed houses and
shops and killed a lot of people.”
- Why Fink Says Swiss Avoiding Recession May Be Bad News for Euro. Larry Fink says he’s worried about a recession in Switzerland. That there won’t be one. If the export-dependent Swiss avoid a slump after a surge in the franc it would make the idea of surviving an overvalued currency -- and leaving the euro -- a little more conceivable in Germany, according to Fink, the co-founder and chief executive officer of BlackRock Inc. Think Gerexit.
- European Stocks Fall as Siemens Disappoints, Greek Banks Slide.
European stocks declined from a seven-year high, snapping their longest
winning streak since April, as Siemens AG and Royal Philips NV posted
disappointing earnings, and Greek stocks tumbled. Siemens slid 3
percent, contributing the most to a drop in a gauge of industrial
companies, after Europe’s largest engineering firm reported a decline in
first-quarter profit. Philips lost 5.9 percent after saying it is
behind on its 2016 financial targets. Greek banks dragged a gauge of
lenders down. The Stoxx Europe 600 Index slipped 1 percent to 368.7 at the close of trading, after earlier falling as much as 1.4 percent.
- Stronger Dollar Punishes U.S. Earnings From P&G(PG) to DuPont(DD). The dollar’s
surge is reducing earnings at American companies from Procter &
Gamble Co. (PG) to Pfizer Inc. (PFE) and DuPont Co. that make a large
portion of their revenue abroad. P&G, the world’s biggest
consumer-products maker, today reported profit that missed analysts’
estimates in the quarter ended Dec. 31 after what Chief Executive
Officer A.G. Lafley called “unprecedented” foreign-exchange rate
fluctuations reduced sales by 5 percentage points. DuPont and
drugmakers Pfizer and Bristol-Myers Squibb Co. (BMY) all posted annual
forecasts that trailed predictions, in part because of the dollar.
- Oil Drop Hits Private Equity as Carlyle Seen Leading Decline. Private
equity firms, which made record profits in the past two years, are
preparing to share the cost of their forays into the U.S. oil business.
Combined earnings per share at the four largest firms, which start
reporting fourth-quarter results this week, probably fell 58 percent
from a year ago, according to 13 analysts surveyed by Bloomberg.
Carlyle Group LP (CG) is expected to lead the decline with a 73 percent
drop, driven by its energy holdings, and Apollo Global Management LLC
(APO) is expected to report a 63 percent drop in earnings. Blackstone
Group LP (BX), the most diversified of the buyout firms, should be least
affected, with an estimated 32 percent slide.
- Copper Falls Near 5-Year Low as China Seen Slowing Down.
Copper futures approached a five-year low as industrial profit last
year posted the smallest gain in data that started in 2000 in China
(CNPRTTLY), the world’s largest metal consumer. Earnings in 2014
increased 3.3 percent, Chinese government
data showed. In December, profit contracted 8 percent, falling
for the third straight month. Copper prices declined as orders
for business equipment dropped for the fourth consecutive month
in the U.S., the second-biggest user. On the Comex in New York, copper futures for March delivery
fell 3.2 percent to settle at $2.4625 a pound at 1:13 p.m.
Earlier, the price touched $2.446. On Monday, the metal dropped
to $2.419, the lowest for a most-active contract since 2009. Copper is piling up in London Metal Exchange warehouses
with inventories climbing for 11 straight sessions, the longest
run since April 2013. They have increased to 238,225 metric
tons, the highest since April.
CNBC:
ZeroHedge:
David Stockman's Contra Corner:
Reuters:
- Exclusive - Apple(AAPL) supplier Foxconn to shrink workforce as sales growth stalls.
Taiwan's Foxconn
Technology Group, the world's largest contract electronics manufacturer,
will cut its massive workforce, the company told Reuters, as the Apple
Inc supplier faces declining revenue growth and rising wages in China.
Under its flagship unit Hon Hai Precision Industry Co Ltd, the group
currently employs about 1.3 million people during peak production times,
making it one of
the largest private employers in the world. Special
assistant to the chairman and group spokesman Louis Woo did not specify
a timeframe or target for the reduction, but noted that labour costs
had more than doubled since 2010, when the company faced intense media
scrutiny following a spate of worker suicides. Revenue growth at the conglomerate
tumbled to 1.3 percent in 2013 and only partially recovered to 6.5
percent last year after a long string of double-digit increases from
2003 to 2012. That decade
saw the firm ride an explosion of popularity in PCs, smartphones and
tablets, largely driven by its main client Apple, but now it is feeling
the effects of falling growth and prices in the gadget markets it
supplies, a trend that is expected to continue. Growth
in smartphone sales will halve this year from 26 percent in 2014,
according to researcher IDC, while PC sales will contract by 3 percent. Similarly, the average smartphone will sell for 19 percent less in 2018 than last year's $297. "Even
if technology is improving, the price will still come down," Woo said.
"We've come to accept that, our customers have come to accept that." Automation
will be key to keeping labour costs under control in the long-term, Woo
said, as the company pushes to have robotic arms complete mundane tasks
currently done by workers.
Telegraph:
- Sadly for all our futures, cheap money is here to stay. Just get used to it. Central banks have been struggling to normalise interest rate policy.
Increasingly, there is reason to doubt they ever will be able to.
In the meantime debtors are accommodated at the detriment of creditors,
borrowers are favoured at the expense of savers, and the holders of assets
are further boosted to the growing exclusion of those who have none. It’s
ever harder to believe in a happy ending.
la Repubblica:
- IMF Lagarde Rules Out Greek Debt Cancellation. IMF will restart
dialogue with Greece to implement planned structural reforms, IMF
Managing Director Christine Lagarde says in an interview. Europe has
internal rules that must be respected.
Style Underperformer:
Sector Underperformers:
- 1) Software -3.83% 2) Disk Drives -1.91% 3) Internet -1.73%
Stocks Falling on Unusual Volume:
- MSFT, PLT, PKG, CAT, SANM, FCFS, HQY, PHG, SAGE, GGG, MWV, STX, MSTR, TDG, PH, ROK, ENR, HOG, FCX, TTM, GNRC, CRH, CMI, INTC, ZNH, PG and SANM
Stocks With Unusual Put Option Activity:
- 1) HUN 2) MSFT 3) JOY 4) RL 5) CAT
Stocks With Most Negative News Mentions:
- 1) DDD 2) FB 3) AAL 4) COP 5) MRO
Charts:
