Style Outperformer:
Sector Outperformers:
- 1) Gaming +2.58% 2) Oil Service +2.34% 3) Steel +2.28%
Stocks Rising on Unusual Volume:
- COLM, CYBR, KING, JCOM, ELLI, WWE, VDSI, FEYE, WWWW, FSL, IRE, BIDU, SKYW, VFC, WAC, FET, HOS, LOGM, SSI, ITT, EGN and WBC
Stocks With Unusual Call Option Activity:
- 1) HZNP 2) CERN 3) FNSR 4) NLY 5) SYMC
Stocks With Most Positive News Mentions:
- 1) IPG 2) CAB 3) KING 4) COLM 5) FLR
Charts:
Evening Headlines
Bloomberg:
- Putin's High Tolerance for Pain and Europe's Reluctance to Inflict It. As a cease-fire emerges in Ukraine that gives Putin a lot of what he
wants, the comments are a reminder of how the country remains trapped
between the weight of Russian history and the force of European
economics. In this squeeze, Putin’s narrative backed by Cold War
memories is coupled with leaders unwilling to blow up ties with a major
trading partner and energy supplier.“ Some EU member states just
don’t care that much about Ukraine,” Paul Ivan, a former Romanian
diplomat now with the European Policy Centre in Brussels, said this
week. “There are countries with historical ties
and good relations with Russia, and for some others they think they’re
far away from Ukraine and they’re willing to compromise that country’s
territorial integrity for their own economic interests.”
- EU Stands by Sanctions on Russia After Ukraine Truce Sealed. European leaders said Russia will have to
wait for relief from economic sanctions, reflecting concern that
Thursday’s cease-fire agreement will only mark a pause in the
war that has devastated eastern Ukraine. The accord was struck after more than 18 hours of non-stop
talks between Ukrainian President Petro Poroshenko, his Russian
counterpart Vladimir Putin, German Chancellor Angela Merkel and
French leader Francois Hollande. It envisages a truce from
midnight at the start of Feb. 15 and reaffirms some commitments
from a failed September bid to end the conflict that has
devastated eastern Ukraine. The collapse of previous cease-fires has stoked doubts as
to whether this one will hold. Ten months of fighting have
killed more than 5,000 people, crushed Ukraine’s economy and
propelled Russia toward a recession through U.S. and European
sanctions. European Union sanctions -- whether to ease or
stiffen them -- remained off the agenda for a summit in
Brussels, with the bloc awaiting proof the truce is holding.
- China Money Rate Set for Longest Run of Weekly Gains Since 2013. The seven-day repurchase rate, a gauge of interbank funding
availability, climbed for a fifth week, adding 27 basis points
to 4.62 percent as of 10:26 a.m. in Shanghai, according to a
weighted average from the National Interbank Funding Center. The
rate fell one three basis point Friday.
- Too Many Car Factories in China? Automakers have been successful at adding factories. Maybe too successful. Domestic and foreign-based carmakers are building more factories in
China than anywhere else, a construction binge that risks hurting
margins in what remains one of the world’s most profitable vehicle
markets. By 2017 there will be 140 car production plants in China, vs.
123 at the end of 2014, estimates JSC Automotive Consulting. According to IHS Automotive forecasts, factories across the mainland
in 2015 will be able to build 10.8 million more vehicles than will be
sold in Greater China. In North America, however, IHS expects plants to
churn out about 3.2 million more cars this year than the factories were
intended to produce when they were built.
- Asian Stocks Advance With Emerging Currencies; Yen Gains. Asian stocks climbed with emerging-market
currencies after a ceasefire deal in Ukraine and signs of
compromise on Greece’s debt negotiations. The yen held gains on
bets that the Bank of Japan will refrain from additional
stimulus.
The MSCI Asia Pacific Index added 0.7 percent by 12:13 p.m.
in Tokyo, as mining and energy shares drove Australia’s S&P/ASX
200 Index toward its highest close since May 2008.
- U.S. Yield Increase in February Hurts Bondholders to Homebuyers. From bondholders to home buyers, this
month’s jump in Treasury yields is starting to bite. U.S. government debt has fallen 1.9 percent in February,
headed for the biggest monthly loss since May 2013, based on
Bloomberg World Bond Indexes. U.S. mortgage rates increased this
week. Benchmark Treasury yields are climbing as investors
prepare for the Federal Reserve to raise interest rates.
Wall Street Journal:
- Ukraine Peace Talks Yield Cease-Fire Deal. Leaders Caution There Is Much to Do to Ensure Truce Holds. Germany and France’s leaders emerged from 17 hours of all-night
negotiating with Russian President Vladimir Putin on Thursday with a
truce for Ukraine intended to glue together the shards of the last
one—but with little confidence in the West that it would.
- Chinese Shake Up Aluminum. Tax Quirks Prompt Smelters to Mask Metal for Export as Processed. A surge in aluminum exports from China is altering market dynamics for
one of the world’s most heavily traded commodities. Because of quirks in
China’s tax system, the trend involves reshaping the metal itself.
- GOP Contender Walker Draws Wall Street Cash. New York Fundraisers Plan Donor Events for the Wisconsin Governor in the Coming Days. Wall Street is warming up to Wisconsin’s Republican Gov. Scott Walker. Several
GOP fundraisers from the financial-services industry and other
Manhattan business sectors are hosting donor events for Mr. Walker, a
likely presidential candidate, when he visits New York next week.
- Putin’s Latest Victory. The Minsk accord ratifies a Russian satrapy in Ukraine. The last time the Kremlin signed an agreement to end the war in
Ukraine—as recently as September—it promised to withdraw “military
equipment as well as fighters and mercenaries” from the war zone, ban
offensive operations and abide by an immediate cease-fire. In exchange
the Ukrainian government granted unprecedented political autonomy to its
rebellious eastern regions.
CNBC:
- These EM bonds are vulnerable to king dollar’s reign. Expectations that the Federal Reserve will hike interest rates
later this year have powered a rally in the U.S. dollar, and with
further gains likely, analyst warn that some dollar-denominated emerging
market (EM) debt is vulnerable. "The dollar's appreciation has pushed up the
local-currency value of EM debt that is denominated in U.S. dollars,
making it harder to service," said Capital Economics' Senior Asia
Economist Daniel Martin.
Zero Hedge:
Business Insider:
Washington Post:
Reuters:
- Euro zone needs radical change, Juncker tells leaders. The euro zone needs fundamental
changes to the way it is run or faces endemic unemployment and
the trap of low economic growth for years to come, the European
Union's chief executive told the bloc's leaders on Thursday. In a presentation, European Commission President Jean-Claude
Juncker called for a deepening of the cooperation that underpins
the 19-member currency area, despite the reluctance of countries
to cede more sovereignty to EU institutions.
AFP:
Financial Times:
- European leaders cautious over ‘Minsk 2’ agreement. European
leaders and analysts were sceptical of the 13-point document that
emerged on Thursday after 16 hours of bruising, all-night discussions in
Minsk. Some gave warning that President Vladimir Putin of
Russia appeared to have come out on top.
Economic Information Daily:
- China
May See More Privately Placed Bond Defaults. A combined 17b yuan of
privately placed bonds listed on the Shanghai and Shenzhen exchanges
will mature this year amid an environment of higher-risk default, citing
Wind Info. The economic slowdown and worsening operating environment
for small cos. may lead to more defaults, the report cites researchers.
Private bonds defaults may also spread to larger cos. the report said.
China Securities Journal:
- China Rate Cut Unlikely in Near Future. An interest rate cut is
unlikely as the latest monetary policy moves need time to take effect
and a narrower interest margin between China and overseas may intensify
capital outflow, a front-page commentary said.
Evening Recommendations
Night Trading
- Asian equity indices are +.25% to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 107.50 -2.5 basis points.
- Asia Pacific Sovereign CDS Index 68.25 -1.25 basis points.
- NASDAQ 100 futures +.01%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- The Import Price Index for January is estimated to fall -3.2% versus a -2.5% decline in December.
10:00 am EST
- Preliminary Univ. of Mich. Consumer Sentiment for February is estimated at 98.1 versus 98.1 in January.
Upcoming Splits
Other Potential Market Movers
- The Fed's Fisher speaking, Eurozone GDP and the (MU) analyst conference could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and real estate
shares in the region. I expect US stocks to open modestly higher
and to weaken into the afternoon, finishing mixed. The Portfolio is
50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Substantially Higher
- Sector Performance: Most Sectors Rising
- Volume: Slightly Below Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 15.71 -7.37%
- Euro/Yen Carry Return Index 141.66 -.65%
- Emerging Markets Currency Volatility(VXY) 11.16 -1.41%
- S&P 500 Implied Correlation 63.33 -3.05%
- ISE Sentiment Index 154.0 +81.18%
- Total Put/Call .86 -10.42%
Credit Investor Angst:
- North American Investment Grade CDS Index 66.04 -1.04%
- America Energy Sector High-Yield CDS Index 716.0 +.31%
- European Financial Sector CDS Index 65.81 -3.85%
- Western Europe Sovereign Debt CDS Index 27.0 +1.54%
- Asia Pacific Sovereign Debt CDS Index 69.22 -.27%
- Emerging Market CDS Index 376.17 -1.97%
- iBoxx Offshore RMB China Corporates High Yield Index 113.29 -.01%
- 2-Year Swap Spread 26.75 +.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -20.75 +1.25 basis points
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 136.0 +2.0 basis points
- China Import Iron Ore Spot $62.27/Metric Tonne +.14%
- Citi US Economic Surprise Index -36.90 -7.3 points
- Citi Eurozone Economic Surprise Index 31.10 +.1 point
- Citi Emerging Markets Economic Surprise Index -8.20 +1.4 points
- 10-Year TIPS Spread 1.67 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -65 open in Japan
- DAX Futures: Indicating +33 open in Germany
Portfolio:
- Slightly Higher: On gains in my tech/retail/biotech/medical sector longs
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -.37% 2) Utilities -.30% 3) Social Media -.21%
Stocks Falling on Unusual Volume:
- ZU, ENSG, CAB, PNRA, CAKE, AXP, BIDU, NTAP, THS, BG, AAP, CSOD, AAWW, SLF, OII, MPAA, TIME, TSLA, ZEN, CTL, PPC, JNJ, K, CSTE, CRAY, PIR, GAS, HOS, TSRA, TSO and THS
Stocks With Unusual Put Option Activity:
- 1) XLI 2) SMH 3) EXPE 4) AXP 5) CBS
Stocks With Most Negative News Mentions:
- 1) ZU 2) CAKE 3) OC 4) CVS 5) CENX
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +3.01% 2) Internet +2.86% 3) Tobacco +2.04%
Stocks Rising on Unusual Volume:
- OWW, LXFT, EXPE, SCOR, TRIP, GNIC, FEYE, SKX, CSCO, LTRPA, NVDA, PNK, KS, CYBR, WFM, IFF, SCOR, GNC, FLO, EFX, DBD, WWAV, LPX, VNTV and JAH
Stocks With Unusual Call Option Activity:
- 1) OWW 2) QLIK 3) TRIP 4) ANR 5) DVN
Stocks With Most Positive News Mentions:
- 1) NVDA 2) SKX 3) MAR 4) OWW 5) CSCO
Charts:
Evening Headlines
Bloomberg:
- Eurogroup Fails to Agree to Next Greek Bailout Steps. Euro-area governments left tough decisions
on the future of Greece’s bailout for next week, after talks
failed to bridge differences over the aid program that the Greek
government blames for economic hardship. With Greece’s current bailout expiring at the end of
February, finance ministers met for six hours in Brussels
without signing off on any conclusions on the way forward for
the region’s most-indebted nation. That leaves open how Greece
can avoid running out of cash and avert a possible exit from the
19-nation currency union.
- Greek Economic Tragedy Sets Scene for Varoufakis on Debt. The root of Greek Finance Minister Yanis
Varoufakis’s desperation for debt relief will be laid bare in
the coming days. The backdrop for the new government is an economy lumbered
with near-record unemployment and a deflationary spiral after
the country plunged into its worst slump since World War II.
While data on Friday may confirm the economy grew in each
quarter of 2014, it has a long way to go to regain output lost
in six years of recession, with the current political crunch
threatening to trip up the recovery.
- Australian Jobless Rate Jumps to 6.4% in January. Australian unemployment climbed to a 12 1/2-year high, sending the currency lower and underscoring last
week’s decision to cut interest rates to a fresh record low. The jobless rate rose to 6.4 percent from 6.1 percent, the
statistics bureau said in Sydney today. That was the worst since
August 2002 and exceeded the median estimate of 6.2 percent from
a survey of 27 economists. The number of people employed fell by
12,200, led by declines in eastern states.
- Asia Stocks Rise as Weak Yen Buoys Japan, Investors Watch Greece. Asian stocks rose as investors monitored
negotiations in Europe on extending Greece’s bailout program and
the yen held losses past 120 per dollar, sending Japan’s Topix
index toward a seven-year high as it reopened after a holiday.
The MSCI Asia Pacific Index gained 0.5 percent to 140.72 as
of 9:03 a.m. in Tokyo, heading for its first advance in six
days. Japan’s Topix index climbed 1.4 percent, heading for its
highest close since Dec. 28, 2007.
Wall Street Journal:
- Debate Opens on New War Powers. Obama Asks Congress to Back Islamic State Fight. President Barack Obama asked Congress for new powers to wage military
operations against the Islamic State militant group, kicking off a
renewed national debate over the scope of wartime powers that should be
afforded to the commander-in-chief. American warplanes have
pounded Islamic State targets for six months, but Mr. Obama on Wednesday
said the proposed resolution authorizing military force is important
not only for...
- Hedge Funds Focused on Currencies Get Big Payoff. January Was Big Winner for Firms, Especially Those Driven by Algorithms.
Currency markets are finally giving hedge funds some bang for their
buck. Thanks
to a consistently soaring dollar—and plunging euro—investment funds
focused on currencies had the best month in years in January. Data from
Hedge Fund Research Inc., which compiles a broad measure of
currency-fund performance, show the group had its best..
- Beijing Directive Cuts Into Debt Issuance. Sales Are Derailed as Doubt Is Cast on Local-Government Backing for Bonds. In the eastern city of Changzhou, known for its dried radish pickles
and a severe housing glut, a government financing vehicle was on track
late last year to sell a $190 million bond. For years, such bonds
have been typically backed by local governments, helping attract
investors while helping fund much-needed infrastructure projects.
- Countering Putin’s Grand Strategy. With Europe weak and distracted, only the U.S. can thwart the Kremlin’s growing ambitions. The heavy fighting in eastern Ukraine this week isn’t the only reason to
be skeptical about the prospects for the peace summit that began
Wednesday in Minsk, Belarus. Even if the meeting among Ukrainian
President Petro Poroshenko, Russian President Vladimir Putin, German
Chancellor Angela Merkel and French President François Hollande produces
a cease-fire agreement that holds up—unlike the one signed last
fall—the conflict’s underlying reality will remain unchanged: The
Russian-backed separatist revolt
Fox News:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- Shippers plan 4-day partial shutdown of U.S. West Coast ports. Shipping lines will
partially shut down 29 U.S. West Coast ports for four of the
next five days, the companies said on Wednesday, as they
postponed the latest round of protracted labor talks with the
dockworkers union amid mounting cargo backups at the harbors. The loading and unloading of cargo freighters will be
suspended, as operations were last weekend, on Thursday and
again on Saturday, Sunday and Monday, the companies' bargaining
agent, the Pacific Maritime Association, said in a statement.
- Applied Materials(AMAT) hurt by low demand for chipmaking machinery. Applied Materials Inc said new
orders in its business that makes semiconductor equipment and
made-to-order chips fell in the first quarter due to weak demand
from foundry customers. The company, whose customers include Samsung Electronics Co
Ltd and Taiwan Semiconductor Manufacturing Co Ltd
, also forecast current-quarter profit and sales below
analysts' expectations. Applied Materials' shares fell 3 percent to $23.53 in
extended trading.
- Baidu(BIDU) revenue falls short of estimates as customers go mobile. Baidu Inc, owner of China's
dominant search engine, reported a lower-than-expected 47.5
percent rise in quarterly revenue as more users switched from
PCs to mobile devices, which have less space for more lucrative
forms of advertising. Shares of the U.S.-listed company fell 7.8 percent to $198
in extended trading on Wednesday.
- Whole Foods(WFM) sales accelerate, shares rise. Whole Foods Market Inc on
Wednesday said same-store sales have accelerated, helped by
stronger consumer confidence and shoppers' positive response to
the upscale grocer's price cutting and its first national
advertising campaign.
Telegraph:
Economic Information Daily:
- China's Machinery Industry
Sales Growth May Slow. Revenue growth for China's machinery industry is
expected to slow to 8% this year because of weak demand, citing Chen
Bin, an official at the China Machinery Industry Federation.
Macau Business Daily:
- Macau
Official Sees Feb. Gaming Revenue Drop. Macau's gross gaming revenue
this month will likely be lower than a year ago, citing Secretary for
Economy and Finance Lionel Leong.
China Securities Journal:
- China-Listed Banks 2014 Profit Growth May Slow. Profit growth at
China-listed banks may have slowed to 8% last year on increased
non-performing-loan exposure risk and higher-than-expected loan
provisions, citing brokerages. Growth of both NPL amounts and ratios will not improve in the short term, report cites unidentified researchers.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 110.0 unch.
- Asia Pacific Sovereign CDS Index 69.50 +.25 basis point.
- NASDAQ 100 futures +.02%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Retail Sales Advance for January are estimated to fall -.4% versus a -.9% decline in December.
- Retail Sales Ex Autos for January are estimated to fall -.5% versus a -1.0% decline in December.
- Retail Sales Ex Autos and Gas for January are estimated to rise +.4% versus a -.3% decline in December.
- Initial Jobless Claims for last week are estimated to rise to 287K versus 278K the prior week.
- Continuing Claims are estimated at 2400K versus 2400K prior.
10:00 am EST
- Business Inventories for December are estimated to rise +.2% versus a +.2% gain in November.
Upcoming Splits
Other Potential Market Movers
- The
BoE Inflation report, $16B 30Y T-Note auction, weekly EIA natural gas
inventory report, Bloomberg US Economic Survey for February, weekly
Bloomberg Consumer Comfort Index, (IT) investor day and the (MLM)
investor day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology 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 50% net long heading into the day.
