Stocks Surging into Final Hour on Central Bank Hopes, Buyout Speculation, Yen Weakness, Energy/Financial Sector Strength

Broad Equity Market Tone:

• Advance/Decline Line: Higher
  

• Sector Performance: Mixed
  

• Volume: Below Average

• Market Leading Stocks: Performing In Line

Equity Investor Angst:

• Volatility(VIX) 14.4 -6.17%

• Euro/Yen Carry Return Index 135.82 +.21%

• Emerging Markets Currency Volatility(VXY) 10.56 -.58%

• S&P 500 Implied Correlation 64.06 -2.12%

• ISE Sentiment Index 94.0 +3.3%

• Total Put/Call .94 -11.32%

• NYSE Arms .53 -67.71% 

Credit Investor Angst:

• North American Investment Grade CDS Index 63.94 -.93%

• America Energy Sector High-Yield CDS Index 1,027.0 +2.01%

• European Financial Sector CDS Index 65.89 -.28%

• Western Europe Sovereign Debt CDS Index 21.60 -2.79%

• Asia Pacific Sovereign Debt CDS Index 60.70 -2.24%

• Emerging Market CDS Index 315.73 -.29%
  

• iBoxx Offshore RMB China Corporates High Yield Index 114.30 +.08%

• 2-Year Swap Spread 24.25 -.25 basis point

• TED Spread 24.0 -.25 basis point

• 3-Month EUR/USD Cross-Currency Basis Swap -23.5 +.25 basis point

Economic Gauges:

• 3-Month T-Bill Yield .02% -1.0 basis point

• Yield Curve 138.0 unch.

• China Import Iron Ore Spot $52.69/Metric Tonne -.85%

• Citi US Economic Surprise Index -60.8 +2.1 points

• Citi Eurozone Economic Surprise Index 64.90 +12.8 points

• Citi Emerging Markets Economic Surprise Index -.8 +.6 point

• 10-Year TIPS Spread 1.75 -3.0 basis points

Overseas Futures:

• Nikkei Futures: Indicating +260 open in Japan

• DAX Futures: Indicating +42 open in Germany

Portfolio: 

• Slightly Higher: On gains in my medical/retail/biotech/tech sector longs

• Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges

• Market Exposure: Moved to 50% Net Long

Today's Headlines

Bloomberg:  

• Greek Plans to Unlock Aid Need Lots of Work, EU Aides Say. Greece’s proposed plans to bolster its finances in exchange for unlocking bailout funds still need lots of work, three European officials said. The 15-page draft, which was discussed Sunday in Brussels, requires more information and details and was a long way from serving as the basis of a deal, said one of the aides, who asked not to be named because the talks were private. Seeking a strategy that passes muster with European officials now withholding loans as the country’s cash crunch deepens, Greece’s government foresees a net increase of 3.7 billion euros ($4 billion) in receipts this year. The biggest chunk would be as much as 875 million euros from the “intensification of audits on lists of bank transfers and offshore entities,” according to the draft.
• Ukraine Faces 30% Risk of Messy Default as Creditor Talks Begin. As Ukraine prepares for debt restructuring talks, most analysts expect the nation to avoid a messy default. Finance Minister Natalie Jaresko last week urged Ukraine’s bondholders to back a debt overhaul in negotiations set to begin within days, or risk bigger losses later. The probability of a disorderly default -- one where there’s no agreement with investors -- is about 30 percent, according to the median of 21 analysts surveyed by Bloomberg on March 20-26. 
• Canadian Junk Market Freezes as Poloz Compounds Oil Collapse. If the Bank of Canada’s surprise interest rate cut was meant to spur companies to borrow, it’s not working in the nation’s high-yield bond market. Even after the central bank lowered borrowing costs on Jan. 21, the current quarter is the first in three years without a single company tapping Canada’s junk-bond market for funds, according to data compiled by Bloomberg. In contrast, U.S. junk bond issuance has already surged to the highest level in six months, the data show.   
• Europe Stocks Rise Most in Three Weeks on Central-Bank Optimism. European stocks rose the most in almost three weeks, poised for their best quarter since 2009, amid optimism central banks will continue to support global growth. The Stoxx Europe 600 Index rose 1.1 percent to 399.84 at the close of trading, extending gains after data showed pending sales of U.S. homes rose more than forecast in February.
• These Charts Show Clearly Why Oil Prices Crashed. (video) In 2014 U.S. oil expanded the most since at least 1900. 
• S&P 500 Profit Reversals Hard to Stop as Bad Quarters Add Up. Analysts predict Standard & Poor’s 500 Index profits are about to decrease for three straight quarters. Investors better hope they don’t. History shows that once earnings drop for that long, they almost always keep falling, and usually take the market with them. In fact, among 17 declines that got to nine months since the Great Depression, exactly one stopped there, in 1967. Any sign that U.S. earnings are about to collapse is enough to strike fear in money managers who have watched shares triple as profits rose almost every year since 2009. Even if analysts are right about the duration of the skid, earnings contractions of three quarters or more have triggered bear markets 82 percent of the time over the past eight decades.  
• UnitedHealth(UNH) Pays $12.8 Billion for Catamaran’s Drug Clients.
• Horizon to Buy Hyperion for $1.1 Billion, Gain Orphan Drugs.

ZeroHedge:

• SocGen Asks The $4.5 Trillion Question. (graph)
• Reuters Asks "Who Is More Of A Threat: Obama Or Putin", Surprised By The Answer.
• Dallas Fed Collapses At Fastest Pace Since Lehman, Lowest Since June 2011. (graph)
• Lynn Tilton Charged By SEC For CLO Fraud, As Warned Here Nearly Two Years Ago.
• Ben Bernanke Pens First Blog Post, Defends Fed, Says He "Was Concerned About Seniors".
• Despite Abysmal Weather, Feb Pending Homes Sales Surge By Most In 9 Months. (graph)
• Germanwings Co-Pilot Head Been Treated For "Suicidal Tendencies" In The Past.
• US Savings Rate Jumps To Highest Since 2012 As Spending Continues To Miss Expectations. (graph)

Business Insider: 

• Texas hasn't been this bad in 2 years.
• 4 charts that show China's stock market right now is total insanity. (graph)

Telegraph:

• Bank of England's new stress test to include China slowdown and eurozone crash. UK's biggest banks to face tough new stress test.

Bear Radar

Style Underperformer:

• Large-Cap Growth +.96%

Sector Underperformers:

• 1) Gold & Silver -2.03% 2) Education -.64% 3) Oil Service -.42%

Stocks Falling on Unusual Volume:

• ALTR, BDSI, WWE, LBIO, AIR, NEWT, OVAS, HWAY, SERV, WBAI, PLT, KRFT, MYL, ROLL, CBMG, CALA, EGL, LO, CALM, QUNR, INXN, STRA, JMEI, WLL, YOKU, EVEP and HWAY
  

Stocks With Unusual Put Option Activity:

• 1) EWJ 2) FEZ 3) MMM 4) KO 5) CIEN
  

Stocks With Most Negative News Mentions:

• 1) ROLL 2) LINE 3) JASO 4) WWE 5) ALTR
  

Charts:

• ETFs Falling on Unusual Volume

• Stocks Falling on Unusual Volume

Bull Radar

Style Outperformer:

• Large-Cap Value +.97%

Sector Outperformers:

• 1) Homebuilders +1.36% 2) Energy +1.39% 3) Computer Services +1.26%
  

Stocks Rising on Unusual Volume:

• HPTX, ICEL, CTRX, ASPX, ADI, XON, MSG, HZNP, DYN, RTRX, THRM, DWA, GNC, FBHS, RCPT, ITG, MSG and SIVB

Stocks With Unusual Call Option Activity:

• 1) ALTR 2) HZNP 3) EA 4) XON 5) ZIOP
  

Stocks With Most Positive News Mentions:

• 1) LMT 2) ADI 3) FINL 4) UNH 5) SSP
  

Charts:

• ETFs Rising on Unusual Volume 

• Stocks Rising on Unusual Volume

Monday Watch

Weekend Headlines 
Bloomberg: 

• Greek Markets Show All at Risk Should Mistake Trigger a Default. In Athens, the unspeakable is at risk of becoming the inevitable. Market metrics show Greece is in danger of sinking under the burden of its debt, putting repayments of about 500 billion euros ($546 billion) owed to European taxpayers, rescue funds, banks and bondholders in jeopardy. Prime Minister Alexis Tsipras is locked in talks with creditors over measures attached to Greece’s bailout loans and a government official said on Friday the country won’t service its debt if creditors don’t release the funds. The government has also floated a restructuring that would link some future payments to economic growth, reduce interest rates and allow more time for repayments. While their intention is to exclude private bondholders, the danger is that talks collapse and Greece leaves the euro, leaving all parties facing losses. 

• ECB Nerves Fray on Greece as Supervisors Rile Central Bankers. Inside the five-month-old union between monetary policy and financial oversight at the European Central Bank, nerves are beginning to fray. As officials seek to replace deposits fleeing Greek banks without blatantly financing the state, the efforts of the institution’s new Single Supervisory Mechanism to do its part are irking the old guard. Central bankers under ECB President Mario Draghi worry that overly-strict orders to lenders could worsen the Greek turmoil. After building an institutional pillar that has supervised the euro area’s largest banks since November, the ECB is now facing one of the worst flare-ups in six years of sovereign-debt crisis. Officials must work out how to align their two policy arms in a way that can find a path through the Greek turmoil and set a template for handling banking turbulence to come. 

• China’s Growth Fell `a Bit’ Too Much: PBOC’s Zhou. (video)

• Japan’s Industrial Output Drops, Adding to Signs of Weakness. Japan’s industrial production fell more than forecast in February, adding to pressure from a drop in consumer spending and faltering inflation. Output declined 3.4 percent from January, when it rose 3.7 percent, the trade ministry said in Tokyo on Monday. The median estimate of 28 economists surveyed by Bloomberg was for a decline of 1.9 percent. The data is the weakest since June last year and underscores the fragility of Japan’s recovery from a recession last year. 

• Asia Stocks Trim Best Quarter Since 2013 as Energy Shares Drop. Asian stocks fell for a third day, trimming the biggest quarterly advance for the regional benchmark index since 2013, as energy and material shares led declines. The MSCI Asia Pacific Index lost 0.3 percent to 146.2 as of 9:05 a.m. in Tokyo.

• Too much of everything spurs commodity exodus as price wars rage. Investors are bailing out of commodity funds at the fastest pace on record, and the exodus shows no signs of ending. Investors are bailing out of commodity funds at the fastest pace on record, and the exodus shows no signs of ending. U.S. exchange-traded funds linked to broad baskets of raw materials saw a net outflow of $1.23 billion over the first three months of the year, the most of any quarter since the securities were created in 2006, data compiled by Bloomberg show. Bank of America Corp. says ample supplies have unleashed price wars, and Goldman Sachs Group Inc. predicts a 20 percent drop for commodities already near a 13-year low. Morgan Stanley and Societe Generale SA also have cut forecasts for a whole range of items.

• Oil Drops for Second Day as Iran Nuclear Talks Remain Deadlocked. Oil fell for a second day as Iranian and Western diplomats worked toward a nuclear deal that may lead to the Islamic Republic boosting crude exports, exacerbating a global supply glut. Futures dropped as much as 1.9 percent in New York.

Wall Street Journal:

• Marco Rubio Makes Plans for 2016 Run. Florida Republican senator is tentatively set to announce his White House bid in Miami. Sen. Marco Rubio (R., Fla.) is laying plans to announce his presidential bid in two weeks, a step that, along with other recent activity among likely contenders, shows the early sparring and positioning in the 2016 race for the White House is about to accelerate.

• Obama Ramps Up Lobbying on Iran as Deadline Looms. White House has shown willingness to accept legislation that would give Congress some oversight over a nuclear deal.

• Uncertain of Obama, Arab States Gear Up for War. A pan-Arab coalition with a patchy record steps up as Yemen falls apart and U.S. policy remains unclear. Few organizations boast a reputation of dysfunction comparable to the Arab League’s. Over seven decades the Arab League has distinguished itself through infighting and fecklessness. But now, with the Obama administration seen as missing in action in the Middle East, the alliance of 22 countries is undergoing a renaissance. 

Fox News:

• Boehner expresses doubts about reaching nuke deal with Iran, vows sanctions if effort fails. (video) House Speaker John Boehner said on Sunday he has “serious doubts” on whether the Obama administration and five other world powers can reach an agreement with Iran to curtail that country’s nuclear program and that Congress will move to impose new sanctions on Tehran if no deal is reached.

MarketWatch.com:

• Profit warnings are piling up. Of S&P 500 companies providing first-quarter outlooks, 84% have been negative.

Zero Hedge:

• Santelli Stunned As Janet Yellen Admits "Cash Is Not A Store Of Value". (video)

• China's Banks Cut Dividends Amid Rising Bad Loans, Expectations Of Falling NIM. (graph)

• What Deflation? The Price Of Ground Beef Has Doubled Since The Last Financial Crisis.

• Why There Is No Wage Growth In America. (graph)

• Explaining US Stock And Bond Markets In 5 Easy Charts. (graphs)

• Dumb Money: 30% Of New Equity Investors In China Have Elementary Education Or Less, Bloomberg Says.

• Obama Administration Bullies Allies Over Iran Nuke Deal Dissent.

• 5 Things To Ponder: Random Musings. (graph)

• Crude Carnage & Hawkish Yellen Leave Dow In The Red For 2015. (graph)

• Greece Prepares To Leave.

• The Bubble Machine Is Complete: Soaring Stocks Push Investors Into Bonds Whose Issuers Buy More Stocks.

• It's Official: Americans Spent All Their "Gas Savings" On Obamacare.

• Finally The "Very Serious People" Get It: QE Will "Permanently Impair Living Standards For Generations To Come".

• Kyle Bass Warns "The Fed Is Backed Into A Corner... Equities Are My Biggest Liquidity Worry".

• How Do The Greeks Really Feel? (graph)

• Welfare Nation Alert: Disability Fund To Run Out Of Cash In Two Years. (graph)

• Both SEC And FINRA Admit That The Market Is Rigged (And They Are Powerless To Fix It).

• Greek Energy Minister Slams "Unscrupulous, Imperialist" Germany, Will Seek "Bold Alternatives" In Russia.

• Republicans Blast Hillary: "Not Even Nixon Destroyed The Tapes".

• Europe Pulls Rug From Under Greece, Says "Nein" To "Vague, Piecemeal" Proposals.

• First Europe, Now The Gulf's Leaders Agree To Form United Arab Military Force.

• What Bond Investors Are Most Concerned About.

• Complacency Reigns Supreme - "Nothing Can Possibly Go Wrong", Right. (graph)

• Australia To Start Taxing Bank Deposits.

• Big Brother Is Here: Facebook(FB) Reveals Its Master Plan - Control All News Flow.

• "The Risks Are Very High" Swiss Billionaire Warns "Global Financial Markets Have Never Been This Distorted Before".

• Here's Which Emerging Markets Are Most Vulnerable To "External Shock".

• Steve Keen Exclaims "The Fed Has Not Learnt Anything From The Crisis".

• Chances For Diplomatic Solution To Ukraine Conflict "Slim", Soc Gen Says.

• Did The Fed Just Whisper "Fire" In A Crowded Market?

Business Insider:

• Tesla(TSLA) is in trouble.

• Ellen Pao has lost her historic discrimination lawsuit against major VC firm Kleiner Perkins.

• Hillary Clinton deleted everything on her email server.

• The US is worried about Iran's elite Revolutionary Guard training Houthi rebels in Yemen.

• Europe's bond market is turning Japanese.

• Here's why Egypt is taking on the huge risk of getting involved in the war in Yemen.

• An anonymous administration official just gave an incoherent defense of Obama's Middle East policy.

• Iran is building a non-nuclear threat faster than experts 'would have ever imagined'. In just over two years, the Iranian government has managed to build up a sophisticated cyberarmy that experts now say is capable of crippling key global infrastructure. 

• A flaw in Facebook lets anyone create as many fake 'Likes' as they want without using a bot army.

• Banking behemoths are getting outmatched by Wall Street's underdogs.

• Israel: The emerging Iran deal 'bears out all of our fears'.

• It's time to start worrying about what Russia's been up to in Latin America.

Telegraph:

• Eurozone can't survive in current form, says PIMCO. Single currency area must become a "United States of Europe" in order to secure its future, says manager of world's largest bond fund.

Night Trading

• Asian indices are -.25% to +1.25% on average.

• Asia Ex-Japan Investment Grade CDS Index 1113.0 unch.

• Asia Pacific Sovereign CDS Index 62.0 +.75 basis point.

• S&P 500 futures +.34%.

• NASDAQ 100 futures +.42%.

Morning Preview Links

Earnings of Note
Company/Estimate

• (AIR)/.37

• (CALM)/1.13

• (UTIW)/-.07

• (PWRD)/.37

Economic Releases
8:30 am EST

• Personal Income for February is estimated to rise +.3% versus a +.3% gain in January.

• Personal Spending for February is estimated to rise +.2% versus a -.2% decline in January.

• PCE Core for February is estimated to rise +1.3% versus a +1.3% gain in January.

10:00 am EST

• Pending Home Sales for February are estimated to rise +.4% versus a +1.7% gain in January.

10:30 am EST

• Dallas Fed Manufacturing Activity for March is estimated to rise to -9.0 versus -11.2 in February.

Upcoming Splits

• None of note

Other Potential Market Movers

• The Fed's Fischer speaking and the Eurozone industrial production/CPI reports could also impact trading today.

BOTTOM LINE: Asian indices are mostly higher, boosted by real estate 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 25% net long heading into the week.

Weekly Outlook

Wall St. Week Ahead by Reuters.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on global growth worries, European/Emerging Markets/US High-Yield debt angst, earnings concerns, Fed rate hike worries, crude oil weakness and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.