NYSE Composite Index:
- Volume 10.0% Above 100-day average
- 10 Sectors Rising, 0 Sectors Declining
- 70.4% of Issues Advancing, 26.2% Declining
- 86 New 52-Week Highs, 6 New Lows
Evening Headlines
Bloomberg:
- China Stock Frenzy Gets Even More Manic With First Leveraged ETF. Want to double down on China’s world-beating stock rally? Now there’s an exchange-traded fund for that. Direxion Investments is starting the first ETF that seeks to provide
twice the daily return of mainland Chinese stocks using leverage,
according to Andy O’Rourke, chief marketing officer for the New
York-based fund provider.
- China Liquor Giant Moutai Reveals Record Deliveries Without Cash. China President Xi Jinping’s crackdown on corruption and
extravagance has cut into demand for luxury goods throughout the
economy. Now, the campaign is bruising the balance sheets of some of
China’s biggest companies. In the latest example, Kweichow Moutai
Co., the $37.9 billion maker
of a fiery liquor long used at political celebrations, has seen a spike
in unpaid bills as distributors delay paying bills. Prices for Moutai
have tumbled, cutting distributor profits and forcing them to buy on
credit. Payments due to the company, what accountants call receivables,
almost quadrupled at the end of September, the most recent quarter
available. As Kweichow Moutai prepares to report earnings next week, the
results will illustrate the corporate fallout of Xi’s crackdown.
- China Stock Jump Blows Up Bond Yields in Threat to PBOC. China’s world-beating stock surge is sucking money away from bonds
and thwarting central bank efforts to cut borrowing costs to support the
economy. Yields on five-year yuan corporate notes with top ratings have jumped
30 basis points in the past month to 4.74 percent, near the highest
since December.
- Islamic State Recruits Teen Soldiers With Cars, Cash and Guns. They look like regular Islamic State militants in khaki fatigues and
black bandanas, exercising and practicing combat routines. Yet their
size and lack of trademark black beards betray them as children. The group, also known as ISIS or Da’esh, is already turning to the
next generation to ensure its legacy of extremism and brutal violence
endures as a U.S.-led offensive chips away at areas it controls in Iraq
and Syria. Using recruitment offices in Syria called “Cubs of the
Caliphate,” the al-Qaeda breakaway group is incorporating young Muslims
into its ranks, sending some into battle or having them shoot hostages.
- Draghi Seen Dispelling QE Duration Doubts as ECB Jolts Economy. No sooner has he started than Mario Draghi is facing questions on how he plans to finish Six weeks into a 1.1 trillion-euro ($1.2 trillion) asset-buying plan
to propel euro-area inflation out of the doldrums, the European Central
Bank president is set to be asked at his regular press conference what
happens if he succeeds before the provisional end-date of September
2016. His challenge is to show that policy makers are determined to cut
off extraordinary support only when they’re sure the economy can stand
on its own.
- Five Questions for Mario Draghi.
- Asian Stocks Drop With Aussie as Data Shows Weaker China Growth. Asian stocks fell from an almost seven-year high and the Australian
dollar slid against most peers as data showed China’s economy slowed to
the weakest pace of expansion since 2009 last quarter. Crude oil rose
for a fifth day.
The MSCI Asia Pacific Index dropped 0.3 percent by 11:10 a.m. in
Tokyo, as the Hang Seng Index fluctuated after a 1.6 percent slide
Tuesday.
- U.S. Seen Becoming Net Energy Exporter on Shale Output. The U.S. government said for the first time that the nation will
become a net energy exporter within 15 years as the shale boom bolsters
crude oil production. U.S. energy exports will exceed imports from 2029 through 2032, and from 2037 through 2040, the Energy Information Administration said Tuesday in its Annual Energy Outlook. The agency raised its oil
output forecasts for 2025 and 2040, while cutting total energy demand
estimates for the same years. The forecast doesn’t anticipate any change
in U.S. law that bans most exports of crude.
- Iron Ore Cut by JPMorgan on Supplies as Hockey Plans China Talks. A worsening mismatch between global iron ore supply and demand
prompted JPMorgan Chase & Co. to reduce price forecasts through
2018, with the world’s biggest mining companies seen sticking with
expansion plan. The raw material will average $51 a metric ton this year, 20 percent
less than previously forecast, the bank said in an e-mailed report on
Wednesday. The 2016 outlook was cut 22 percent to $50 a ton, while
predictions for 2017 and 2018 were reduced by 18 percent and 8 percent,
respectively, it said.
Wall Street Journal:
- Florida Doctor Linked to Sen. Robert Menendez Indicted for Health-Care Fraud. Salomon E. Melgen received $105 million over six years from Medicare, indictment alleges. A Florida doctor whose practice twice was raided by federal
authorities received $105 million over six years from Medicare, an
indictment alleges, highlighting vulnerabilities in the federal program
for the elderly and disabled. A federal grand jury indicted
Salomon E. Melgen, a North Palm Beach ophthalmologist, on 46 counts of
health care fraud, alleging among other things that he filed false
Medicare...
- Oil Layoffs Hit 100,000 and Counting. Roughnecks feel brunt of cuts as tumble in price of crude ripples through energy industry.
- U.S. Warns Iran to Halt Unilateral Military Moves in Iraq. Move is part of a
broader U.S. effort to weaken Tehran’s growing sway in the fight against
Islamist extremists in the Middle East.
- Obama’s One-Man Nuclear Deal. Congress will get a vote but the President still has a free hand. President Obama says he wants Congress to play a role in approving a
nuclear deal with Iran, but his every action suggests the opposite.
After months of resistance, the White House said Tuesday the President
would finally sign a bill requiring a Senate vote on any deal—and why
not since it still gives him nearly a free hand.
Fox News:
- Senate panel passes Iran bill giving Congress a say on nuclear deal. The Senate Foreign Relations Committee on Tuesday unanimously
approved legislation that would allow Congress to have a say on a
possible U.S. nuclear negotiation with Iran. The legislation next will
go to the full Senate for a vote. There was a strong bi-partisan effort for an increased congressional
role as the June 30 deadline approaches for international negotiators to
turn the framework of a nuclear deal into the real thing.
MarketWatch.com:
- Intel’s(INTC) cap spending cuts may fuel concerns. Intel Corp.’s lackluster first quarter results were on target with its previously reduced guidance, as the chip giant was
hit by sluggish demand for PCs, but a bigger surprise was a far
larger-than-expected cut in its capital spending forecast.
CNBC:
- Wary of natural disaster, NY Fed bulks up in Chicago: Report. The
New York branch of the U.S. Federal Reserve, wary that a natural
disaster or other eventuality could shut down its market operations as
it approaches an interest rate hike, has added
staff and bulked up its satellite office in Chicago. Some market technicians have transferred from New
York and others were hired at the office housed in the Chicago Fed,
according to several people familiar with the build-out that began about
two years ago, after Hurricane Sandy struck Manhattan.
Zero Hedge:
Business Insider:
NY Times:
- Hillary Clinton Was Asked About Email 2 Years Ago. Hillary Rodham Clinton was directly asked by congressional investigators in a December 2012
letter whether she had used a private email account while serving as
secretary of state, according to letters obtained by The New York Times. But
Mrs. Clinton did not reply to the letter. And when the State Department
answered in March 2013, nearly two months after she left office, it
ignored the question and provided no response for it.
Reuters:
- No swift recovery seen for copper market amid surplus, weak demand. The copper market will not
get any respite from weak prices and excess supplies any time
soon, even after recent hefty cost cutting and project delays
have removed more than a million tonnes of new capacity, top
executives said on Tuesday.
Speaking at the CRU Copper
conference, the executives
painted one of the bleakest outlooks in years at the CRU Copper
conference. While prices have recovered to around $6,000 per tonne from
January when the market crashed below $5,500 for the first time since
2009, the market was languishing in a surplus of some 160,000 tonne at the end of the first quarter, according to estimates. Demand
from China, the world's top consumer, grew at a meager 0.7 percent over
that period as credit tightened and buying of refrigerators and air
conditioners waned. While cuts in production and delays to projects have removed
eight projects equating to 1.5 million tonnes that were due to
come onstream by 2019, it will take years before the global
market feels any supply pinch and prices recover.
Financial Times:
- Global trade faces poor growth, says WTO. Global
trade is poised for at least two more years of disappointing growth,
according to a new forecast that will add what some see as increasing evidence that globalisation is stalling.
Evening Recommendations
Piper Jaffray:
- Raised (GPRO) to Overweight, target $55.
- Raised (ULTA) to Overweight, target $170.
Night Trading
- Asian equity indices are -.75% to +.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 106.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 59.0 +.75 basis point.
- NASDAQ 100 futures -.05%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (ASML)/.92
- (BAC)/.29
- (SCHW)/.24
- (DAL)/.44
- (PNC)/1.71
- (PGR)/.43
- (USB)/.76
- (KMI)/.23
- (NFLX)/.64
- (SNDK)/.70
Economic Releases
8:30 am EST
- Empire Manufacturing for April is estimated to rise to 7.17 versus 6.90 in March.
9:15 am EST
- Industrial Production for March is estimated to fall -.3% versus a +.1% gain in February.
- Capacity Utilization for March is estimated to fall to 78.6% versus 78.9% in February.
- Manufacturing Production for March is estimated to rise +.1% versus a -.2% decline in February.
10:00 am EST
- The NAHB Housing Market Index for April is estimated to rise to 55.0 versus 53.0 in March.
10:30 am EST
- Bloomberg
consensus estimates call for a weekly crude oil inventory build of
+3,540,000 barrels versus a +10,949,000 barrel gain the prior week.
Gasoline Supplies are estimated to fall by -660,000 barrels versus a
+817,000 barrel gain the prior week. Distillate inventories are
estimated to rise by +255,000 versus a -250,000 barrel decline the prior
week. Finally, Refinery Utilization is estimated to rise +.64% versus a
+.7% gain the prior week.
2:00 pm EST
- US Fed Beige Book Release.
4:00 pm EST
Upcoming Splits
Other Potential Market Movers
- The
Fed's Lacker speaking, Fed's Bullard speaking, ECB rate decision,
Eurozone CPI report, Australia Unemployment report, Bank of Canada rate
decision, weekly MBA mortgage applications report, BofA Merrill Oil/Gas
Conference, Needham Health Care Conference, (WBA) analyst day and the
(WDAY) analyst day could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by commodity and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Modestly Lower
- Sector Performance: Mixed
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.08 +1.0%
- Euro/Yen Carry Return Index 132.84 +.16%
- Emerging Markets Currency Volatility(VXY) 9.63 -3.31%
- S&P 500 Implied Correlation 65.63 +1.31%
- ISE Sentiment Index 102.0 -15.17%
- Total Put/Call 1.11 +24.72%
Credit Investor Angst:
- North American Investment Grade CDS Index 61.78 -.25%
- America Energy Sector High-Yield CDS Index 1,109.0 -.70%
- European Financial Sector CDS Index 65.36 +4.52%
- Western Europe Sovereign Debt CDS Index 22.90 +4.57%
- Asia Pacific Sovereign Debt CDS Index 58.70 -.17%
- Emerging Market CDS Index 296.43 -.61%
- iBoxx Offshore RMB China Corporates High Yield Index 116.09 +.32%
- 2-Year Swap Spread 26.75 +.5 basis point
- TED Spread 25.75 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -22.75 -.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 139.0 -1.0 basis point
- China Import Iron Ore Spot $50.78/Metric Tonne +4.01%
- Citi US Economic Surprise Index -48.0 -2.4 points
- Citi Eurozone Economic Surprise Index 55.70 -.5 point
- Citi Emerging Markets Economic Surprise Index -6.6 -.4 point
- 10-Year TIPS Spread 1.81 unch.
Overseas Futures:
- Nikkei Futures: Indicating +15 open in Japan
- DAX Futures: Indicating +52 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/tech/retail/medical sector longs
- Market Exposure: 50% Net Long
Bloomberg:
- Putin’s Mideast Gains Trump $27 Billion Loss From Iran Agreement. As Russian President Vladimir Putin has shown in Crimea and eastern
Ukraine, he’s willing to take an economic hit to expand his political
influence. He’s taking the same approach with Iran. Lifting sanctions and allowing Iranian oil onto global markets would
threaten to deepen the plunge in crude prices, curbing revenue from
Russia’s biggest export. The cost: about $27 billion, based on estimates
from the central bank in Moscow.
- G-7 Nations Say Russia Too Early on Iran Air-Defense Sale. Germany
and Italy said Russia’s planned sale of air-defense systems to Iran
before world powers complete an agreement on the country’s nuclear
program is premature. German Foreign Minister Frank-Walter Steinmeier, hosting a Group of
Seven meeting on Tuesday, said Russia’s decision runs counter to the
spirit of negotiators who reached a framework nuclear agreement with
Iran this month. Such deals should wait until a full agreement, which is
envisaged by June 30, he said.
- Gazprom Plans $4 Billion Extra Spending in 2015 to Target China. Russia’s natural gas exporter is planning $4 billion of additional
investments this year to prepare for the start of supplies to China as
the European Union snubs a proposed pipeline across the Black Sea. Most of the spending increase will go into OAO Gazprom’s eastern gas
program, including the development of fields and infrastructure, Chief
Executive Officer Alexey Miller said in an interview shown Tuesday on
Rossiya 24 state television.
- Greece Is Risk for Euro Area as Contagion Possible, Knot Says. The situation in Greece is of concern and a Greek default may have a
contagion effect, European Central Bank Governing Council member Klaas
Knot said. “The already shaky liquidity position of Greek banks will worsen if
deposits continue to flow out,” Knot said in the Dutch central bank’s
semi-annual Financial Stability Report published on Tuesday. “An
unhoped-for bankruptcy of the government would heavily derail the Greek
economy” and “the impact of such an event on other countries in the
euro-area is still uncertain.”
- Greece Risks Increasing as Negotiations on Aid Drag On, IMF Says. As negotiations for Greek economic reforms drag on, a further
“crisis” that would unsettle financial markets can’t be ruled out,
according to International Monetary Fund chief economist Olivier
Blanchard. “An exit from the euro would be extremely costly for Greece, would be
extremely painful,” Blanchard said at a press briefing in Washington on
Tuesday, after stating the IMF is working on and hopes to come to an
agreement with Greece. That said, “the rest of the euro zone is in a
better position to deal with a Greek exit” than it has been previously.
- Surging Dollar to Boost Europe, Japan as U.S. Slows, IMF Says. The strengthening dollar is boosting growth
in the euro area and Japan while taking some steam out of the
U.S. recovery, the IMF said in its latest forecast. The International Monetary Fund left its projection for
global growth in 2015 unchanged from three months ago at 3.5
percent, according to its World Economic Outlook released
Tuesday. Underneath the stable forecast, however, the IMF
depicts a global economy being reshaped by swings in currency
markets and the drop in oil prices. The Washington-based crisis lender cut its U.S. expansion
forecast by 0.5 percentage point to 3.1 percent, still the
fastest among major developed economies. The Japan growth
outlook increased to 1 percent from 0.6 percent and the euro
area is projected to expand 1.5 percent as weakening currencies
provide a “welcome boost,” the IMF said. Emerging markets are showing their own mixed forecasts,
with growth projected to slow to 4.3 percent from 4.6 percent in
2014, the fifth straight annual decline and the same forecast as
in January.
- European Stocks Decline as Nokia, Banks Lead Stoxx 600 Lower. European stocks retreated from a record, snapping a five-day advance, as Nokia Oyj and banks declined.
The Stoxx Europe 600 Index fell 0.5 percent to 411.7 at the close of
trading, paring earlier losses of as much as 0.8 percent. Nokia slid 3.6
percent after confirming talks to buy Alcatel-Lucent SA, which jumped
16 percent. Banco Santander SA and Intesa Sanpaolo SpA dragged bank
stocks to the biggest loss on the Stoxx 600.
- Treasuries Rise as Retail-Sales Miss Adds to Signs of Slowdown. Add retail sales to the mix of economic data boosting optimism among Treasury investors. U.S. government debt jumped after a report showed consumer purchases
increased less than forecast in March, stoking speculation a harsh U.S.
winter isn’t the only thing holding back economic growth. The drop in
U.S. 10-year yields was the most since April 3, when a below-forecast
payrolls report had traders pushing back bets for when the Federal
Reserve will start raising interest rates from zero.
- Swelling Distressed Bond Market Crashes U.S. Company Debt Party. The Federal Reserve may be putting off raising interest rates from
near zero, but the days of cheap money for everyone in credit markets
have already come and gone. The amount of outstanding distressed bonds -- those that investors
consider most likely to default -- has more than doubled in the past
year to $121 billion, according to Bank of America Merrill Lynch index
data. Prices on the debt have tumbled 2.6 percent in 2015, the biggest
decline for the period since the 2008 credit crisis.
- Your Company's Big Appetite For Debt May Be Dangerous To Your Job. Researchers find link between declining domestic demand and firings at high-debt firms. Employees working for companies with big debt loads were particularly
vulnerable to firings when household demand collapsed in the last
recession.
ZeroHedge:
Business Insider:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Gaming -3.71% 2) Road & Rail -1.34% 3) Semis -.93%
Stocks Falling on Unusual Volume:
- BXMT, Z, NSC, KANG, DL, YZC, ZNH, BSET, FWP, TRIL, NOAH, ETH, UNP, ATHN, WETF, TOUR, ALTR, ISRG, CNMD, CYOU, PSMT, WFC, QRVO and MDSO
Stocks With Unusual Put Option Activity:
- 1) Z 2) CSX 3) EWY 4) OIL 5) EWH
Stocks With Most Negative News Mentions:
- 1) NSC 2) SANM 3) CSC 4) Z 5) UNP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Oil Service +2.52% 2) Steel +2.44% 3) Networking +1.86%
Stocks Rising on Unusual Volume:
- BLDR, WUBA, CARA, PRE, GWPH, TEDU, ECOM, CIEN, ZIOP, CHRS, CJES and INVN
Stocks With Unusual Call Option Activity:
- 1) FOXA 2) JBL 3) Z 4) ZNGA 5) RRC
Stocks With Most Positive News Mentions:
- 1) QCOM 2) SAGE 3) AAVL 4) RVNC 5) WBA
Charts:
