Broad Equity Market Tone:
- Advance/Decline Line: Substantially Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Slightly Above Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- Volatility(VIX) 14.19 +10.43%
- Euro/Yen Carry Return Index 140.18 +.19%
- Emerging Markets Currency Volatility(VXY) 10.39 -.86%
- S&P 500 Implied Correlation 66.88 +3.15%
- ISE Sentiment Index 152.0 +67.03%
- Total Put/Call 1.22 +28.42%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.87 +1.67%
- America Energy Sector High-Yield CDS Index 1,083.0 -.32%
- European Financial Sector CDS Index 74.11 +5.25%
- Western Europe Sovereign Debt CDS Index 25.18 +10.73%
- Asia Pacific Sovereign Debt CDS Index 59.80 -.47%
- Emerging Market CDS Index 299.06 -.19%
- iBoxx Offshore RMB China Corporates High Yield Index 118.07 +.10%
- 2-Year Swap Spread 26.0 +.25 basis point
- TED Spread 26.50 -1.5 basis points
- 3-Month EUR/USD Cross-Currency Basis Swap -20.5 -.75 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% +1.0 basis point
- Yield Curve 155.0 +2.0 basis points
- China Import Iron Ore Spot $58.70/Metric Tonne +2.0%
- Citi US Economic Surprise Index -65.30 -9.2 points
- Citi Eurozone Economic Surprise Index 5.20 -1.3 points
- Citi Emerging Markets Economic Surprise Index -18.10 +.1 point
- 10-Year TIPS Spread 1.93 +1.0 basis point
Overseas Futures:
- Nikkei Futures: Indicating -132 open in Japan
- DAX Futures: Indicating +9 open in Germany
Portfolio:
- Slightly Lower: On losses in my biotech/medical/retail/tech sector longs
- Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
- Market Exposure: Moved to 25% Net Long
Bloomberg:
- Greece Says Compromise Not Possible Under Current Conditions. Greece blamed international creditors for the failure to achieve a
breakthrough in bailout talks, saying a deal won’t be possible until
they agree on a common set of demands. A Greek official said that the European Commission and the
International Monetary Fund are confronting the country with too many
red lines and need to better coordinate their message. A spokesman for
the European Commision wasn’t immediately available for comment.
- EU Demands Concessions as Greece Hurtles Toward Deadlines. Euro-area
finance chiefs urged Greece to bow to their terms for releasing aid
within days to avert a cash crunch. With Greek officials fanning out
across the continent to plead their
case, Portuguese Finance Minister Maria Luis Albuquerque warned Tuesday
that the currency bloc won’t make contingency plans to prepare for a
possible breakdown in talks and encouraged Greek Prime Minister Alexis
Tsipras to take the offer on the table. “It has been difficult but we still hope it will be possible to have a
good outcome of this discussion,” Albuquerque said in a television
interview in London.
- Islamic State Claims Responsibility for Texas Attack. The
terrorist group that calls itself Islamic State claimed that "two
soldiers of the caliphate" carried out the attack in Garland, Texas,
over the weekend, in an audio statement on the Al Bayan radio station on
Tuesday, the Associated Press reports. Two men, whom federal
officials identified as Elton Simpson and Nadir Soofi, wounded a
security officer at a cartoon contest that included images of the
prophet Muhammad. Both men were shot and killed by responding officers.
- Global Bonds Sell Off as Oil Fuels Inflation Concern; Gold Gains. Treasuries fell with European bonds as oil’s rally above $60 a
barrel added to signs of higher inflation, while concern rose that Greece won’t be able to resolve its debt crisis. Gold advanced and U.S. stocks slid. The yield on 10-year Treasury notes added four basis points to 2.18
percent at 12:26 p.m. in New York, extending an eight-week high. German
bonds resumed losses, while Spanish debt tumbled with Greek stocks. The
Standard & Poor’s 500 Index lost 0.6 percent after closing four
points from a record, and European equities dropped to the lowest since
March 10.
- China Stocks to Suffer 20% Correction, Mobius Says. (video)
- Emerging Stocks Drop Led by China as Investors Await U.S. Data. Emerging-market stocks headed for a two-week low on concern China
will impose measures to cool the world’s best-performing market and as
investors awaited U.S. economic data to gauge the timing of an
interest-rate increase. The MSCI Emerging Markets Index lost 0.2 percent to 1,046.43 at 9:37
p.m. in New York. The Shanghai Composite Index sank the most in three
months as state media warned investors about market risks and concern
grew that new share sales will divert funds from existing equities.
- Greek Drop Leads Europe Stocks Down Amid Growing Default Concern. A slide in Greek shares led European stocks to their lowest level in
two months on concern that debt negotiations will fail to secure
funding in time to prevent the nation defaulting. The Stoxx Europe
600 Index fell 1.5 percent to 391.01 at the close of
trading, after earlier rising as much as 1.1 percent on
better-than-estimated company results. Shares extended losses after a
Greek official said a funding deal won’t be possible until international
creditors agree on
a common set of demands. Greece’s ASE Index slid 3.9 percent, the most
in seven weeks.
- Einhorn’s Greenlight Reduces Stock Wager Amid Productivity Bust. Hedge fund manager David Einhorn is scaling back bets on rising
stocks on the prospect that a strong dollar, weak oil prices and a
tightening labor market will squeeze corporate profits. “Our current thinking is that 2015 is setting up to be a challenging
environment and we are positioned accordingly,” Vinit Sethi, director of
research at Einhorn’s DME Advisors, said Tuesday on a conference call
discussing results at Greenlight Capital Re Ltd. Einhorn is chairman of Greenlight Re, which uses the hedge fund
manager’s investing strategy. Bets on rising assets exceeded short
wagers by 15.5 percentage points at the end of March, Cayman
Islands-based Greenlight Re said Monday in a regulatory filing. That
compares with net exposure of 38.9 percentage points as of Dec. 31.
- David Tepper Dethroned as King of Hedge Fund Pay. (video)
Wall Street Journal:
ZeroHedge:
Business Insider:
Financial Times:
Telegraph:
Style Underperformer:
Sector Underperformers:
- 1) Hospitals -2.77% 2) Utilities -2.42% 3) Semis -2.15%
Stocks Falling on Unusual Volume:
- QLYS, NSM, RAIL, KS, KLIC, BBW, SCOR, CGNX, ELLI, XNCR, AEGR, RKT, ACTA, SYNT, IP, WLK, ONDK, BLMN, VNQI, RGR, ANIP, PTCT, DGLY, LNKD, GOV, HRTX, ONCE, ISIS, EGOV, HLS, MFRM, EOG, FCE/A, DENN, NTCT, ZEN, BSFT, MUSA, PBYI and ROSE
Stocks With Unusual Put Option Activity:
- 1) PBI 2) WMB 3) XLY 4) XLU 5) CAR
Stocks With Most Negative News Mentions:
- 1) PBYI 2) SBUX 3) BABA 4) MFRM 5) IP
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Steel +3.38% 2) Oil Service +3.11% 3) Oil Tankers +.58%
Stocks Rising on Unusual Volume:
- SALE, CHUY, NLS, GLNG, BCO, ABMD, KMT, EL, IDTI, MIC, TDW, LPX, DO, SDRL, GVA, NLNK, MIC and AMAG
Stocks With Unusual Call Option Activity:
- 1) CAG 2) ZU 3) SE 4) CVC 5) LC
Stocks With Most Positive News Mentions:
- 1) DOW 2) CHUY 3) V 4) NFLX 5) N
Charts:
Evening Headlines
Bloomberg:
- Forget Tanks. It’s Russia’s Ruble That’s Conquering East Ukraine. As a wobbly cease-fire keeps eastern Ukraine’s warring factions
apart, Russia’s ruble is conquering new territory across the breakaway
republics. In Donetsk, the conflict zone’s biggest city, supermarkets have
opened ruble-only checkout counters to serve the fighters in camouflage
lining up along pensioners. Bus and tram tickets come with a conversion
from Ukraine’s hryvnia to the Russian currency. Gas-station workers are
paid in rubles because that’s what their rebel customers use to fuel their armored jeeps.
- These Chinese Stocks Are Trouncing the Market on Soccer Stimulus. Xi Jinping’s plan to make China a soccer superpower is winning over
fans in an unlikely place: the nation’s $7.7 trillion stock market. Nine listed companies with ties to the country’s soccer league have
surged an average 158 percent since the Chinese president first signaled
plans in March 2014 to revive a sport plagued by match-fixing and an 82
ranking in FIFA’s international league.
- China’s Stocks Drop as Best-Performing Phone Shares Lead Decline. China’s stocks fell amid concern recent gains were excessive
relative to the outlook for economic growth. Phone companies, the best
performers over the past month, led declines. China United Network Communications Ltd. slid 4.1 percent after
jumping 60 percent since last month. Everyday Network Co. and Nanfeng
Ventilator Co. plunged more than 5 percent, dragging down the ChiNext
index of small companies. Energy companies provided some market support,
with China Oilfield Services Ltd. and Offshore Oil Engineering Co.
jumping 10 percent on industry reform speculation, according to Zheshang
Securities Co.
The Shanghai Composite Index dropped 0.7 percent to 4,449.43 at 10:09 a.m. local time. The CSI 300 Index fell 1 percent.
- In Land of Negative Yields, Junk Bonds Are The New Haven Assets.
The new fixed-income haven is, of all things, the market for junk
bonds. With government bonds in Germany to Japan and Slovakia yielding
less
than nothing, money is pouring into exchange- traded funds that buy
speculative-grade debt, traditionally the riskiest of fixed-income
assets. The pace is staggering. So far this year, about $9 billion has flowed
into the funds globally, a significant chunk for the $44.4 billion
market in junk-debt ETFs.
In the land of negative yields, even the most conservative firms such
as Zurich Insurance Group AG and Assicurazioni Generali SpA, the
biggest Swiss and Italian insurers, are planning to invest in
sub-investment grade debt for the first time.
- Goldman: Expansion in Stock Valuations Will End When the Fed Raises Rates. They expect interest rates to go up in September. The second-longest expansion in U.S. stock-market valuations in more
than three decades is coming to an end, according to Goldman Sachs
Group Inc. Stock valuations have surged 62 percent since September 2011, the
longest period of multiple expansion since the height of the Internet
bubble in December 1999, when the S&P 500’s forward
price-to-earnings ratio had climbed for 61 straight months, according to
Goldman. The current run is 42 months old and Goldman predicts it will
end when the Federal Reserve lifts interest rates, which the strategists
believe will happen in September.
Wall Street Journal:
Fox News:
- New offensive frees captives from Boko Haram; exposes group's bloodlust. A major offensive by Nigerian forces has freed nearly 700 captives
from Boko Haram in the last week, while also further exposing the
Islamist terror group's bottomless propensity for evil. As many as 10 girls were stoned to death last week as rescuers closed
in on the terrorist group's stronghold in the Sambisa forest in the
northern Borno state. Survivors told of their harrowing escape from the
terror group, which claims to be aligned with ISIS.
Zero Hedge:
Business Insider:
Telegraph:
Securities Times:
- China
May Raise Stamp Tax in 3Q, Brokerage Says. China may raise the stamp
tax on stock trading to boost fiscal revenue as recent market volume
keeps surging, citing a research not of Changjiang Securities.
Evening Recommendations
Night Trading
- Asian equity indices are -1.0% to +.5% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 unch.
- Asia Pacific Sovereign CDS Index 60.0 -.5 basis point.
- NASDAQ 100 futures -.15%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 AM EST
- The Trade Deficit for March is estimated at -$41.7B versus -$35.4B in February.
9:45 am EST
- Final Markit US Services PMI for April is estimated at 57.8 versus a prior estimate of 57.8.
10:00 am EST
- The IBD/TIPP Economic Optimism Index for May is estimated to fall to 50.0 versus 51.3 in April.
- ISM Non-Manufacturing for April is estimated to fall to 56.2 versus 56.5 in March.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Kocherlakota speaking, Eurozone PPI report, China HSBC Services
PMI, US weekly retail sales reports, Robert Baird Growth Stock
Conference, Wells Fargo Industrial/Construction Conference, (LXK)
analyst meeting and the (CUDA) investor meeting could also impact
trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by real estate
and industrial 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.
