Style Underperformer:
Sector Underperformers:
- 1) Biotech -1.81% 2) Hospitals -1.42% 3) Airlines -1.41%
Stocks Falling on Unusual Volume:
- ARDX, MCO, PBI, TRW, FCN, MCO, PBI, TRW, FCN, HA, GES, DBVT, SONS, WYN, NGVC, CPSI, SYY, OTEX, SNA, BZH, ICPT, EXR, ARLP, LABL, CAVM, CHSP, OMER, TGI, MAN and CLDT
Stocks With Unusual Put Option Activity:
- 1) DHR 2) THC 3) S 4) BHI 5) ANF
Stocks With Most Negative News Mentions:
- 1) ANF 2) DOW 3) LULU 4) OPHT 5) KOP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +2.89% 2) Oil Service +2.21% 3) Construction +1.82%
Stocks Rising on Unusual Volume:
- OAS, NMM, WAC, TEN and SCTY
Stocks With Unusual Call Option Activity:
- 1) CAM 2) AWAY 3) TMV 4) DAL 5) HA
Stocks With Most Positive News Mentions:
- 1) DECK 2) ISRG 3) DISH 4) PSB 5) T
Charts:
Weekend Headlines
Bloomberg:
- Greece Wants Special ECB Help While Going ‘Cold Turkey’ on Aid. Greece is counting on the European Central
Bank to maintain a financial lifeline while the week-old
government in Athens negotiates new terms on its international
bailout package, Finance Minister Yanis Varoufakis said. While the country is “desperate” for funds, it will forgo
further disbursements of emergency aid until negotiating a “new
social contract” with its creditors, he said. He set an end-May
deadline for reaching a deal on a revamped rescue with the euro
area and the International Monetary Fund.
- Merkel Said to Avoid Meeting Tsipras, Doubt Tax Plans. German Chancellor Angela Merkel wants to
avoid being drawn into a direct confrontation with Greek Premier
Alexis Tsipras and is unlikely to agree to a bilateral meeting
with him at a European Union summit next week, a German
government official said. The chancellor’s goal is to show Tsipras that he is
isolated in Europe, according to the official, who asked not to
be named because the discussions are private. What’s more, she
sees little room for maneuver to provide further support for
Greece and is skeptical about Tsipras’s claims that he can raise
revenue by cutting corruption and increasing taxes on the rich,
the official added.
- Greek markets plunge as SYRIZA digs in on challenge to austerity. Greece’s government bonds and stock market plunged in the week after the
election of Syriza, the political party whose vow to renegotiate debt
obligations and roll back austerity measures has sparked an investor
flight. Greek 10-year yields rose 276 basis points, or 2.76 percentage points,
to 11.17 percent as of 4:55 p.m. London time Friday, the biggest weekly
increase since May 2012. The 2 percent security due in February 2025
fell 12.65, or 126.50 euros per 1,000-euro ($1,129) face amount, to
54.465.
- Poroshenko Urges Ukraine Cease-Fire After Minsk Peace Talks Fail. Ukrainian President Petro Poroshenko called
for a truce in the eastern European country after peace talks
broke down and violence escalated. Poroshenko, German Chancellor Angela Merkel and French
President Francois Hollande insisted during a telephone
conversation Sunday on “an unconditional and immediate cease-fire as the conflict is escalating and the number of civilian
casualties is growing,” according to a statement on the
Ukrainian leader’s website.
- ECB Bond-Buying Plan Has Investors Questioning How It All Works. Mario Draghi’s trillion-euro puzzle is
missing some key pieces. When the European Central Bank president announced a
program on Jan. 22 to buy 60 billion euros ($68 billion) of
assets a month for at least 19 months to avert deflation, he
surprised investors with the size of the stimulus. He also provided more details than anticipated. Yet
analysts poring over the ECB’s statements are finding that
several critical points remain unclear.
- Podemos Seeks to Restructure Public Sector Debt. Pablo Iglesias, the leader of Spanish anti-austerity party Podemos, pledged to restructure the nation’s
debt if he can convert his opinion-poll lead into election
victory, following the example of his ally, Greek Prime Minister
Alexis Tsipras. European officials need to take heed of Nobel laureates who
say that Spain needs to reduce its debt before it can properly
revive the economy, Iglesias said.
- Dashed Dreams of Sunac Bailout Sends Kaisa Bonds Lower. Kaisa Group Holdings Ltd.’s dollar bonds
slid after Sunac China Holdings Ltd.’s announcement it would buy
some of the company’s projects in Shanghai damped speculation
the troubled developer might be rescued by its peer.
- Wife of Beheaded Reporter `Proud' He Showed War's Tragedy. The wife of journalist Kenji Goto said she
was proud of her husband’s passion for conveying the “tragedies
of war” after his beheading by Islamic State. “My family and I are devastated by the news of Kenji’s
death,” Rinko wrote in a statement published by the Rory Peck
Trust, a U.K. group that supports freelance journalists. “I
remain extremely proud of my husband who reported the plight of
people in conflict areas.”
- China’s Stocks Fall Most in Two Weeks on Manufacturing, Minsheng. China’s stocks fell the most in two weeks
after an official manufacturing gauge signaled the first
contraction in more than two years and China Minsheng Banking
Corp.’s President Mao Xiaofeng resigned. China Minsheng led declines for financial companies,
sliding 4.5 percent after Caixin magazine reported that Mao is
being investigated by authorities. China Railway Construction
Corp. and Air China Ltd. dropped more than 4 percent after the
government’s Purchasing Managers’ Index declined to 49.8 last
month from 50.1 in December. The nation’s benchmark money-market
rates jumped for a fourth day after the securities regulator
approved 24 initial public offerings. The Shanghai Composite Index slid 1.9 percent to 3,147.99
at 9:37 a.m. The gauge has fallen 6.8 percent over the past five
days as the government stepped up scrutiny of margin lending,
while the factory data add to concern the economy is weakening.
- Asia Stocks Drop as China PMIs Miss; Aussie Bonds Advance. Asian stocks slumped, with the regional
benchmark index heading for its longest losing streak in four
months, as Chinese manufacturing gauges signaled contraction.
Crude oil retreated and Australian bond yields slid to records.
The MSCI Asia Pacific Index lost 0.4 percent by 11:46 a.m.
in Tokyo, as the Hang Seng China Enterprises Index declined 1.7
percent.
- Dollar Rises 7th Month as Global Easing Burnishes U.S. Assets. The dollar pushed its winning streak to
seven straight months for the first time in a decade as a wave
of easing by the world’s major central banks enhanced the appeal
of U.S. assets. The euro posted its biggest monthly decline since September
2011 after the European Central Bank’s announcement of sovereign-bond purchases on Jan. 22. Russia’s ruble plunged
after an unexpected interest-rate cut and Canadian dollar fell
to an almost six-year low. Treasuries had the best January in 27
years. The U.S. unemployment rate is forecast to remain at a
more than six-year low before the Feb. 6 report as the Federal
Reserve looks to tighten monetary policy.
- Hedge-Fund Bulls Betting Most on Gold in Two Years: Commodities. Hedge funds are the most bullish on gold in
more than two years, betting the metal’s allure will strengthen
as slowing economies in Europe and Asia threaten U.S. expansion. Speculators increased their net-long position by 80 percent
this year, U.S. government data show. The U.S. economy expanded
at a slower-than-forecast pace in the fourth quarter and Federal
Reserve officials acknowledged global risks at the end of their
policy meeting last week.
- Obama Said to Seek 19% Global Minimum Tax to Aid Road Fund. President Barack Obama will propose that
U.S.-based companies pay a minimum 19 percent tax on their
future foreign earnings, capturing profits that are now often
beyond the government’s reach. Obama will also seek a 14 percent mandatory tax on about $2
trillion in stockpiled offshore profits, said two people
familiar with his budget proposals, declining to be named
because the document won’t be made public until Feb. 2.
Companies would pay that tax regardless of whether they bring
the money back to the U.S., the two said, creating a revenue
stream the president would use to pay for roads, bridges and
other infrastructure projects.
- Oil Workers in U.S. on First Large-Scale Strike Since 1980. The United Steelworkers union, which
represents employees at more than 200 U.S. oil refineries,
terminals, pipelines and chemical plants, began a strike at nine
sites on Sunday, the biggest walkout called since 1980. The USW started the work stoppage after failing to reach
agreement on a labor contract that expired Sunday, saying in a
statement that it “had no choice.” The union rejected five
contract offers made by Royal Dutch Shell Plc on behalf of oil
companies including Exxon Mobil Corp. and Chevron Corp. since
negotiations began on Jan. 21.
- Walker Surging in Iowa Poll as Bush Struggles. Wisconsin Governor Scott Walker is surging, former Florida Governor
Jeb Bush is an also-ran and former Secretary of State Hillary Clinton is
dominating in a new poll of Iowans likely to vote in the nation's first presidential nominating contest. The
Bloomberg Politics/Des Moines Register Iowa Poll, taken Monday through
Thursday, shows Walker leading a wide-open Republican race with 15
percent, up from just 4 percent in the same poll in October. Senator
Rand Paul of Kentucky was at 14 percent and former Arkansas Governor Mike Huckabee, who won the Iowa caucuses in 2008,
stood at 10 percent. Bush trailed with 8 percent and increasingly is viewed negatively by likely Republican caucus-goers.
Wall Street Journal:
- Death Toll Mounts as Ukraine Cease-Fire Talks Break Down. Kiev Says It Expects Surge in Fighting As Russia Sends New Convoy Into Ukraine. Cease-fire talks broke down between Ukraine’s government and
Russian-backed rebels while Kiev reported 28 soldiers killed over the
weekend in some of the deadliest fighting since a tentative peace deal
was signed in September. Artillery duels around a government-held
railway hub of Debaltseve in eastern Ukraine squelched hopes to stem a
return to full-scale fighting. Both sides accused the other of shelling
civilian areas Sunday.
- The Alarming Thing About Climate Alarmism. Exaggerated, worst-case claims result in bad policy and they ignore a wealth of encouraging data. It is an indisputable fact that carbon emissions are rising—and faster
than most scientists predicted. But many climate-change alarmists seem
to claim that all climate change is worse than expected. This ignores
that much of the data are actually encouraging. The latest study from
the United Nations Intergovernmental Panel on Climate Change found that
in the previous 15 years temperatures had risen 0.09 degrees Fahrenheit.
Fox News:
MarketWatch.com:
- Americans are failing to pump gas-price savings back into the economy. Americans are taking the money they are saving at the gas pump and
socking it away, a sign of consumers’ persistent caution even when
presented with an unexpected windfall. This newfound commitment
to frugality was illustrated this past week when the nation’s biggest
payment-card companies said they aren’t seeing evidence consumers are
putting their gasoline savings toward discretionary items like travel,
home renovations and electronics.
CNBC:
- Spain's anti-austerity Podemos stages show of force before elections. Tens of thousands marched in Madrid on Saturday in the biggest show
of support yet for Spanish anti-austerity party Podemos, whose policies
and surging pre-election popularity have drawn comparisons with
Greece's new Syriza rulers. Crowds chanted "yes we can" or "tic tac tic tac"
to suggest the clock was ticking for Spain's scandal-ridden political
elite. Many waved Greek and Republican flags and banners reading "the
change is now" or "Pablo president".
- Department of Justice probing Moody's pre crisis mortgage ratings: WSJ. Moody's Investors Service is under investigation by the U.S. Justice Department for its actions in advance of the 2008 financial crisis, the Wall Street Journal reported on Sunday, with regulators probing why it issued favorable
ratings to mortgage deals that ultimately went bust.
Zero Hedge:
- "We Can't Do This Forever," Fed Admits "Market Will Overwhelm Us".
The market forces are going to overwhelm us. We’re not going to be able
to hold the line anymore. And then you get that rapid snapback in
premiums as the market realizes that central banks can’t do this
forever. And that’s going to cause volatility and disruption.
Financial Times:
- Ukraine appeals for military help in fight with pro-Russian rebels.
Ukraine has appealed for urgent international military assistance to
combat an “electronic warfare” offensive, which it said is giving
pro-Russian rebels a critical advantage in the worsening conflict.
Western nations have so far rebuffed Kiev’s calls for direct military
assistance in the fight against Moscow-backed separatists in the east
of the country.
- Eurozone alarm grows over Greek bailout brinkmanship. Eurozone
officials are increasingly worried that Greece’s brinkmanship over its
bailout will plunge the country into financial chaos after its finance
minister said on Sunday that it would take up to four months to agree a
“new contract” with creditors.
Telegraph:
Welt:
- Schaeuble Warns Tsipras Against a Debt Cut. German Finance
Minister Wolfgang Schaeuble says Greek govt should be wary of stocking
further discussion about a possible debt cut, citing an interview.
Rejects Greek demands for debt forgiveness. Warns against allowing the
ECB bond buying program to ease reform pressure in Europe.
Boerse Online:
- Bundesbank's Nagel Warns Markets Growing Opaque. Financial
markets are becoming increasingly fragmented and less democratic,
especially as large banks resort to using dark pools, or private trading
venues, citing Bundesbank board member Joachim Nagel as saying in
Munich.
Weekend Recommendations
Night Trading
- Asian indices are -.75% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 113.0 +3.0 basis points.
- Asia Pacific Sovereign CDS Index 71.25 +2.25 basis points.
- NASDAQ 100 futures +.17%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Personal Income for December is estimated to rise +.2% versus a +.4% gain in November.
- Personal Spending for December is estimated to fall -.2% versus a +.6% gain in November.
- The PCE Core for December is estimated unch. versus unch. in November.
9:45 am EST
- Final Markit US Manufacturing PMI for January is estimated at 53.7 versus a prior estimate of 53.7.
10:00 am EST
- Construction Spending for December is estimated to rise +.7% versus a -.3% decline in November.
- ISM Manufacturing for January is estimated to fall to 54.5 versus 55.5 in December.
- ISM Price Paid for January is estimated to rise to 39.8 versus 38.5 in December.
Upcoming Splits
Other Potential Market Movers
- The Eurozone PMI report, UK PMI report, RBA rate decision and the Fed Vice Chair of Atlanta Bank speaking could
also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the week.
Week Ahead by Bloomberg.
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.
BOTTOM LINE: I expect US stocks to finish the week modestly lower on escalating
Russia/Ukraine tensions, global growth fears, rising European/Emerging
Markets/US High-Yield debt angst, earnings concerns, yen strength and
technical selling. My intermediate-term trading indicators are giving
neutral signals and the Portfolio is 25% net long heading into the week.
The Weekly Wrap by Briefing.com.
*5-Day Change
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Most Sectors Declining
- Volume: Slightly Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 19.47 +3.78%
- Euro/Yen Carry Return Index 138.72 -.81%
- Emerging Markets Currency Volatility(VXY) 10.99 +6.29%
- S&P 500 Implied Correlation 65.70 -1.22%
- ISE Sentiment Index 90.0 +25.0%
- Total Put/Call 1.07 -5.31%
Credit Investor Angst:
- North American Investment Grade CDS Index 69.14 +1.98%
- America Energy Sector High-Yield CDS Index 761.0 +.74%
- European Financial Sector CDS Index 68.07 +5.84%
- Western Europe Sovereign Debt CDS Index 25.17 -1.10%
- Asia Pacific Sovereign Debt CDS Index 70.22 +1.78%
- Emerging Market CDS Index 403.62 +1.72%
- iBoxx Offshore RMB China Corporates High Yield Index 113.48 +.41%
- 2-Year Swap Spread 24.0 +1.25 basis points
- TED Spread 24.5 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -13.75 +.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 120.0 -4.0 basis points
- China Import Iron Ore Spot $62.21/Metric Tonne -1.68%
- Citi US Economic Surprise Index -4.0 -5.1 points
- Citi Eurozone Economic Surprise Index 10.0 +12.3 points
- Citi Emerging Markets Economic Surprise Index -4.80 +1.6 points
- 10-Year TIPS Spread 1.64 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -45 open in Japan
- DAX Futures: Indicating +5 open in Germany
Portfolio:
- Slightly Higher: On gains in my biotech sector longs, index hedges and emerging markets shorts
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and took some profits in my biotech longs
- Market Exposure: Moved to 25% Net Long
