Broad Equity Market Tone:
- Advance/Decline Line: About Even
- Sector Performance: Most Sectors Declining
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 13.45 +.30%
- Euro/Yen Carry Return Index 136.59 -.20%
- Emerging Markets Currency Volatility(VXY) 10.29 -.10%
- S&P 500 Implied Correlation 63.13 -.69%
- ISE Sentiment Index 52.0 -40.91%
- Total Put/Call .98 +13.95%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.41 -.40%
- America Energy Sector High-Yield CDS Index 1,013.0 -.81%
- European Financial Sector CDS Index 67.99 +1.04%
- Western Europe Sovereign Debt CDS Index 22.62 +3.98%
- Asia Pacific Sovereign Debt CDS Index 60.72 +.70%
- Emerging Market CDS Index 313.88 -1.32%
- iBoxx Offshore RMB China Corporates High Yield Index 114.03 -.18%
- 2-Year Swap Spread 26.25 -1.0 basis point
- TED Spread 25.75 -1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -23.75 -1.0 basis point
Economic Gauges:
- 3-Month T-Bill Yield .02% +2.0 basis points
- Yield Curve 131.0 -3.0 basis points
- China Import Iron Ore Spot $55.86/Metric Tonne +1.92%
- Citi US Economic Surprise Index -57.80 +15.5 points
- Citi Eurozone Economic Surprise Index 51.0 +11.3 points
- Citi Emerging Markets Economic Surprise Index .7 unch.
- 10-Year TIPS Spread 1.77 +2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -51 open in Japan
- DAX Futures: Indicating +11 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/tech sector longs and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- Russia Calls on U.S. to Remove Its Nuclear Weapons From Europe. Russia called for a ban on American nuclear
weapons in parts of Europe, saying the U.S. is breaking an
international agreement by holding joint nuclear training
missions with NATO allies that don’t possess such weapons. Using ships and airfields as well as training crews from
non-nuclear states from the North Atlantic Treaty Organization
in such exercises is “in direct contradiction to the letter and
spirit” of the Nuclear Non-Proliferation Treaty, or NPT,
ministry spokesman Alexander Lukashevich said in a statement on
its website.
- Euro area waits for Greek Plan C. European
officials are preparing to assess Greece's third set of economic policy
proposals with German Chancellor Angela Merkel urging Prime Minister
Alexis Tsipras to do what is needed to qualify for aid. Tsipras'
government may submit a comprehensive list of policy measures aimed at
securing more financial aid by the end of the week. That document
needs the endorsement of Greece's official creditors and the finance
officials' committee before ministers will consider whether it's up to
scratch. Euro-area finance officials will hold a call on Wednesday to
discuss progress on Greece, two people familiar with the plans said.
- Soros Says Greece Now Lose-Lose Game After Being Mishandled. (video) The chances of Greece leaving the euro area
are now 50-50 and the country could go “down the drain,”
billionaire investor George Soros said. “It’s now a lose-lose game and the best that can happen is
actually muddling through,” Soros, 84, said in a Bloomberg
Television interview due to air Tuesday. “Greece is a long-festering problem that was mishandled from the beginning by all
parties.”
- French Output Growth Cools as Manufacturing Weakness Persists. France’s private-sector output lost momentum
this month as manufacturing shrank for an 11th consecutive
month, holding back the recovery. Markit Economics said on Tuesday that its composite
Purchasing Managers Index for services and manufacturing slipped
to 51.7 from 52.2 in February. While the factory measure rose to
48.2 from 47.6, it remained below the 50 mark that divides
expansion from contraction. The services gauge declined to 52.8
from 53.4.
- Banks Push European Stocks Higher With Stoxx 600 Nearing Record. Lenders led a rally in European stocks,
sending the Stoxx Europe 600 Index near a record. Spain’s Banco Santander SA and Italy’s Intesa Sanpaolo SpA
climbed more than 1.5 percent, while France’s Societe Generale
SA added 2.5 percent. Deutsche Lufthansa AG lost 1.6 percent as
Germanwings, its low-cost subsidiary, operated a plane that
crashed in southern France. The Stoxx 600 advanced 0.3 percent to 402.49 at the close
of trading in London, reversing an earlier drop of as much as
0.5 percent as data showed that euro-area business activity
expanded faster than forecast.
- Beijing to Shut All Major Coal Power Plants to Cut Pollution. Beijing, where pollution averaged more than
twice China’s national standard last year, will close the last
of its four major coal-fired power plants next year. The capital city will shutter China Huaneng Group Corp.’s
845-megawatt power plant in 2016, after last week closing plants
owned by Guohua Electric Power Corp. and Beijing Energy
Investment Holding Co., according to a statement Monday on the
website of the city’s economic planning agency. A fourth major
power plant, owned by China Datang Corp., was shut last year.
- Here's How $20 Oil Could Become a Reality If Storage Runs Out. (video) The looming storage crisis explained.
- Morgan Stanley(MS) Cuts Commodities Outlook on China Demand. Morgan Stanley cut its price forecasts for
almost all base metals and bulk commodities as China’s
“dormant” industry fails to bolster demand in the world’s
biggest consumer of copper and iron ore. The bank reduced its 2015 estimate for nickel by 23 percent
from its previous estimate to an average $14,815 a metric ton
and lowered copper by 16 percent to $5,945 a ton. It cut its
iron ore outlook by 28 percent and coking coal by 16 percent.
- Bullard Says Markets Risk Rate-Rise Surprise If They Ignore Fed. Investors risk suffering a Federal Reserve
interest-rate rise surprise unless market expectations for
future tightening line up with the outlook of policy makers,
said St. Louis Fed President James Bullard. Bullard said active discussion by the Fed about the timing
of the first rates increase since 2006 ought to ensure that it
doesn’t come as a shock when policy eventually moves.
- Speed Traders Team Up in Microwave-Tower Superhighway Plan. Two key competitors in the technological
arms race that’s driving financial markets ever closer to light
speed have called a truce. KCG Holdings Inc., a brokerage with roots in high-frequency
trading, and World Class Wireless LLC will unite their networks
of microwave towers, connecting major market centers around the
globe, according to a statement released last month. WCW, which
is owned by ECW Wireless, has the same address and senior
managers as high-frequency trader Jump Trading LLC. A
representative for Jump said the firm declined to comment.
Wall Street Journal:
CNBC:
- Profit recession: This is what you need to know. (video) The suddenly dour forecast for corporate profits in 2015 is accompanying fears that a recession will be close behind. In fact, the two have gone pretty much hand in
hand over the years, which is why a looming earnings pullback in
corporate America has sparked concern on Wall Street. Since the end of
World War II in 1945, each of the 10 economic recessions has been
accompanied by a decline in earnings growth.
- Nasty tax surprise for Obamacare customers (video).
ZeroHedge:
Business Insider:
The Times:
- West’s tech bubble is ‘about to burst’. Silicon Valley is in a bubble and it is about to burst, one of the technology
industry’s shrewdest investors has warned. A considerable number of “unicorns” — young, private technology companies
worth $1 billion or more — are doomed to fail in the coming months, Sir
Michael Moritz, the chairman of Sequoia Capital, told The Times.
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -2.03% 2) Utilities -1.31% 3) Steel -1.02%
Stocks Falling on Unusual Volume:
- KW, WLL, IHS, GIII, TMO, ES, SAAS, HGR, ZFGN, GLMD, GLP, CMCM, SBNY, PPS, NICE, GLPW, CENX, ALDW, SAFM, POOL, KSU, COR, ANET, GOGO and ATHM
Stocks With Unusual Put Option Activity:
- 1) LOCK 2) OAS 3) DXJ 4) BRCM 5) HOT
Stocks With Most Negative News Mentions:
- 1) CENX 2) FCX 3) SONS 4) NE 5) HGR
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Homebuilders +1.96% 2) Biotech +.95% 3) Restaurants +.65%
Stocks Rising on Unusual Volume:
- DGLY, ABMD, MKC, OVAS, MDXG, HDS and TWTR
Stocks With Unusual Call Option Activity:
- 1) CCL 2) CONN 3) QRVO 4) WLL 5) PAYX
Stocks With Most Positive News Mentions:
- 1) KMB 2) GOOG 3) DRI 4) CMI 5) PKE
Charts:
Evening Headlines
Bloomberg:
- Greece and Germany Head for a Showdown. (video)
- Yuan Usage Is Losing Momentum Outside Asia, HSBC Survey Suggests. The yuan’s rise in global trade is losing
momentum and adoption outside of Asia-Pacific remains limited as
complex rules deter companies, according to an annual survey by
HSBC Holdings Plc. The report highlights the challenge for China as it seeks
to internationalize its currency and open up its capital
markets. Premier Li Keqiang is pushing for the yuan to be added
to the International Monetary Fund’s basket of four reserve
currencies, aiding the nation’s attempts to contest the dollar’s
dominance in global trade and finance.
- Most Asian Stocks Retreat as Investors Await China Factory Data. Most Asian stocks fell, following a drop in
U.S. equities, as industrial companies declined and investors
awaited manufacturing data from China.
About three shares dropped for every two that rose on the
MSCI Asia Pacific Index, which traded little changed at 148.77
as of 9:03 a.m. in Tokyo.
- Iron Ore Cut 28% at Morgan Stanley on China’s Loss of Confidence. Morgan Stanley, which began the year saying
the worst was probably over for iron ore prices, cut forecasts
for the raw material through 2017, citing weak conditions in
China and a seaborne surplus that’ll more than double. The steel-making commodity will average $57 a metric ton in
2015, 28 percent less than a previous forecast, analysts Tom
Price and Joel Crane wrote in a quarterly report on Tuesday. The
2016 outlook was cut 13 percent to $65 and the 2017 forecast was
reduced 5 percent to $71 a ton, according to the report.
- Fed’s Rate Path Post-Liftoff Won’t Be Smooth, Fischer Says. Federal Reserve Vice Chairman Stanley
Fischer wants investors to fasten their seatbelts. Fischer said on Monday in New York that raising interest
rates “likely will be warranted before the end of the year”
and cautioned policy wouldn’t be uniform or predictable.
- Buyback Blackout Leaves U.S. Stocks on Their Own Before Earnings. U.S. stocks are entering part of the year
when one of their biggest support systems goes away. Buybacks, which reached a monthly record in February and
have surged so much they make up about 2 percent of daily
volume, are customarily suspended during the five weeks before
companies report quarterly results, according to Goldman Sachs
Group Inc. With the busiest part of first-quarter earnings
seasons beginning in April, the blackout is getting started now.
Wall Street Journal:
- U.S. Car-Making Boom? Not for Auto-Industry Workers. U.S. auto-industry wages have declined despite rise in output due to competition from foreign parts makers. U.S. auto production is nearing all-time highs on the back of strong
domestic demand and steady export increases. But American-made cars and
trucks are increasingly loaded with parts imported from Mexico, China
and other nations.
- Fed’s Williams: Midyear Will Be Time to Start Rate Increase Debate. Federal Reserve Bank of San Francisco President John Williams reiterated on Monday his belief that central bankers should consider raising rates some time this summer.
- The Rising Menace From Disintegrating Yemen. The U.S. suffers a major setback in the war on terror as a proxy war between Iran and Saudi Arabia looms. The evacuation of U.S. Special Forces from their base in southern Yemen
on Friday because al Qaeda had taken over the nearby city of al-Houta is
hard to spin as anything but a major setback for the war on terror. All
the more so since last month the few remaining U.S. diplomats in Yemen
had flown out of San’a, the capital, because of the threat from Houthi
rebels. The American ambassador to Yemen now operates from the Saudi
port city of Jeddah.
Fox News:
- Terror triumvirate: ISIS, Al Qaeda, Boko Haram training together in Mauritania: analyst. (video) The world’s three most infamous terrorist organizations are working
together at Al-Qaeda-run training camps in the Sahara Desert in
Mauritania, where dozens of recruits from the U.S., Canada and Europe
are being indoctrinated into violent jihad and training for attacks that
could expand the so-called caliphate across North and West Africa,
according to analysts.
Zero Hedge:
Business Insider:
Financial Times:
- Raise rates or face ‘devastating’ bubbles, says Fed official. The
US risks inflating asset price bubbles with “devastating consequences”
if it leaves interest rates at zero, according to a senior Federal
Reserve official. James Bullard, head of the Reserve Bank of St
Louis, told the Financial Times on Monday the Fed “should get on with
normalisation” as soon as possible so that it does not have to raise rates more aggressively later causing significant market volatility.
Evening Recommendations
Night Trading
- Asian equity indices are -.75% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 112.75 -.25 basis point.
- Asia Pacific Sovereign CDS Index 60.25 -.25 basis point.
- NASDAQ 100 futures +.03%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (GIII)/.83
- (HDS)/.10
- (IHS)/1.36
- (MKC)/.64
- (CBK)/-.10
- (SONC)/.12
- (SCS)/.20
Economic Releases
8:30 am EST
- The CPI for February is estimated to rise +.2% versus a -.7% decline in January.
- The CPI Ex Food & Energy for February is estimated to rise +.1% versus a +.2% gain in January.
9:00 am EST
- The FHFA House Price Index for January is estimated to rise +.5% versus a +.8% gain in December.
9:45 am EST
- Preliminary US Markit Manufacturing PMI for March is estimated to fall to 54.6 versus 55.1 in February.
10:00 am EST
- New Home Sales for February are estimated to fall to 464K versus 481K in January.
- Richmond Fed Manufacturing Index for March is estimated to rise to 3.0 versus 0.0 in February.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Bullard speaking, Eurozone PMI, UK CPI, 2Y T-Note auction, weekly
US retail sales reports and the BB&T Industrials conference
could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and real estate shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Higher
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 13.01 -.08%
- Euro/Yen Carry Return Index 136.96 +.93%
- Emerging Markets Currency Volatility(VXY) 10.29 -.96%
- S&P 500 Implied Correlation 61.41 +1.94%
- ISE Sentiment Index 94.0 -5.05%
- Total Put/Call .82 +2.50%
Credit Investor Angst:
- North American Investment Grade CDS Index 62.29 -1.12%
- America Energy Sector High-Yield CDS Index 1,024.0 -.19%
- European Financial Sector CDS Index 67.33 +4.72%
- Western Europe Sovereign Debt CDS Index 21.76 -.14%
- Asia Pacific Sovereign Debt CDS Index 60.60 -.06%
- Emerging Market CDS Index 317.89 -1.28%
- iBoxx Offshore RMB China Corporates High Yield Index 114.25 +.04%
- 2-Year Swap Spread 27.25 +.75 basis point
- TED Spread 26.75 +.75 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -22.75 unch.
Economic Gauges:
- 3-Month T-Bill Yield .00% unch.
- Yield Curve 134.0 -1.0 basis point
- China Import Iron Ore Spot $54.81/Metric Tonne +.27%
- Citi US Economic Surprise Index -73.30 -1.2 points
- Citi Eurozone Economic Surprise Index 39.70 -.5 point
- Citi Emerging Markets Economic Surprise Index .7 +1.3 points
- 10-Year TIPS Spread 1.75 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -45 open in Japan
- DAX Futures: Indicating +25 open in Germany
Portfolio:
- Slightly Higher: On gains in my medical/tech/retail sector longs
- Market Exposure: 50% Net Long
