Style Outperformer:
Sector Outperformers:
- 1) Hospitals +2.59% 2) REITs +1.64% 3) Homebuilders +1.63%
Stocks Rising on Unusual Volume:
- QLTY, PHH, GEVA, HUBS, BABA, ATSG, ALXN, ANN, AHS, MMS, QRVO, OVAS, VECO, COTY, ATVI, RGEN, CORE, SUNE, VECO, LDRH, GSM, BLUE, ANN, BWC, ATSG, CBPX, ALB, PRAA, WBMD, INSY, YHOO, EQC and VC
Stocks With Unusual Call Option Activity:
- 1) ATVI 2) HFC 3) QRVO 4) PRU 5) MO
Stocks With Most Positive News Mentions:
- 1) ATML 2) QRVO 3) MSI 4) BABA 5) CONN
Charts:
Evening Headlines
Bloomberg:
- ECB Decision on Greek Haircuts Said to Depend on Political Talks. The European Central Bank will decide after next week’s meeting of
euro region finance ministers whether to tighten Greek access to
emergency liquidity, two people familiar with the matter said. The ECB is prepared to raise the discount demanded on Greek
collateral to a level last seen in 2014 unless the country’s government
shows a willingness to compromise in bailout talks, said one of the
officials, who spoke on condition of anonymity. An ECB spokesman
declined to comment.
- Euro-Area Bonds Caught in QE Paradox as Short Sellers Book Gains. The European Central Bank’s bond-buying program has landed investors
in a quandary that’s whipping up volatility in the region’s
fixed-income markets. Signs the plan is helping turn around the euro area’s economy
triggered a 1.4 percent loss on the region’s government bonds in April,
the first in 16 months. That selloff has spiraled into a rout in the
first days of May, with seven straight days of declines for German
10-year bonds.
- Morgan Stanley(MS) Ends Seven-Year Bullish Call on Chinese Equities. Morgan Stanley downgraded Chinese stocks for the first time in more
than seven years, saying the market has become expensive after share
prices surged and profitability fell to the weakest level since the
global recession in 2009.
The U.S. brokerage lowered its rating to equal-weight from overweight
on the MSCI China Index, Jonathan Garner, its Hong Kong-based head of
strategy for Asia and emerging markets, wrote in a report dated May 7.
- China’s Manufacturing Hub Faces Labor Shortage and Higher Wages. Chinese exporters in the Pearl River Delta manufacturing hub are
facing persistent labor shortages and rising wages even as the economy
continues to slow. Wages in the region are forecast to rise by 8.4 percent this year,
according to a survey of manufacturing clients by Standard Chartered
Plc. Over 85 percent of respondents said labor shortages are at least as
bad as last year.
- Global Bond Rout Spreads to Japan as Three-Day Break Ends. Japan’s government bonds joined a worldwide rout in sovereign debt
as investors in Tokyo returned from a three-day national holiday. Benchmark 10-year yields were set for their biggest increase since
Feb. 3 after losses in U.S. Treasuries mounted following comments by
Federal Reserve Chair Janet Yellen on Wednesday that long-term
government debt is overpriced. Yields on 10-year German bunds rose to
their highest level this year as investors bet whether European yields
were too low given rising oil prices and a deadlock in Greece’s debt
talks.
- China’s Stocks Head for Biggest Three-Day Rout Since June 2013. China’s stocks headed for their worst three-day performance in
almost two years amid speculation new share sales will sap funds,
valuations have become excessive and the government will take measures
to control margin trading. Utilities and industrial companies, which posted the biggest gains in
Shanghai in the past three months, led declines. China Railway Group
Ltd. and Huadian Power International Corp. dropped more than 5 percent.
China Life Insurance Co. slid 4.8 percent after rising 6 percent
yesterday.
The Shanghai Composite Index fell 1.4 percent to 4,168.23 at 9:50 a.m.
- Asian Stocks, Bonds Extend $2 Trillion Global Selloff; Oil Drops. Asian stocks and bonds retreated, extending a global rout, as Japan
returned from a three-day holiday. Oil slipped after reaching its
highest this year.
The MSCI Asia Pacific Index slid 1 percent by 11.06 a.m. in Tokyo, with all major gauges in the region retreating.
- The World Has Shrunk for Goldman as Commodity Rout Sinks Freight. The collapse in global rates for shipping commodities from the
world’s mines to mills and utilities will persist until at least 2020 on
a glut of vessels and stalling cargo growth, according to Goldman Sachs
Group Inc. The extended slump is set to intensify competition in the iron ore
and coal markets, benefiting the biggest, low-cost suppliers, analysts
Christian Lelong and Amber Cai wrote in a report. Higher-cost producers
may suffer, they said.
- Loeb Says Buffett Full of Inconsistencies on Hedge Funds, Taxes. Hedge-fund manager Daniel Loeb said he enjoys reading Warren
Buffett’s annual letters to shareholders of Berkshire Hathaway Inc., and
finds the billionaire full of inconsistencies on topics like hedge
funds and taxes. “I love contrasting his words with his actions,” Loeb said at the
SkyBridge Alternatives Conference in Las Vegas on Wednesday, a gathering
of hedge fund managers, former politicians and celebrities at the
Bellagio hotel. “But I also like how he criticizes hedge funds yet he
really had the first hedge fund. He criticizes activists. He was the
first activist. He criticizes financial service companies, yet he likes
to invest in them. He thinks that we should all pay more taxes but he
loves avoiding them himself.”
CNBC:
Zero Hedge:
Business Insider:
Reuters:
- GM(GM) says China April vehicle sales down 0.4 pct. General Motors and its
Chinese joint ventures sold 258,484 vehicles in China in April,
down 0.4 percent from a year earlier, the U.S. automaker said on
Thursday.
GM for the first time reported retail sales to customers
rather than wholesale vehicle sales to dealers. Retail figures
are generally viewed as a more accurate gauge of consumer
demand. Under the previous methodology, the automaker had reported
an 8 percent year-on-year rise in March and a 1.3 percent
increase in February.
- Keurig cuts 2015 forecast as new brewer sales fail to take off. Keurig Green Mountain Inc cut its
full-year sales and profit forecasts as the company struggles to
convince consumers to take up its new Keurig 2.0 brewing system,
sending its shares sharply lower in extended trading. Sales of Keurig's brewers have slowed in the past two
quarters due to high prices of the 2.0 brewing system, poor
initial reviews and confusion over whether the new machine could
still brew certain brands. Shares of the company, which also reported
lower-than-expected second-quarter profit and sales, fell as
much as 19 percent in extended trading.
China Securities Journal:
- China Checks Banks' Non-Compliant Stock Investment. Regulators
asked for "strict" scrutiny over whereabouts of bank funds, especially
loans, citing an unidentified industry participant.
Evening Recommendations
Night Trading
- Asian equity indices are -1.25% to -.50% on average.
- Asia Ex-Japan Investment Grade CDS Index 108.0 +2.5 basis points.
- Asia Pacific Sovereign CDS Index 60.0 -.5 basis point.
- NASDAQ 100 futures +.07%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
7:30 am EST
- Challenger Job Cuts for April.
8:30 am EST
- Initial Jobless Claims are estimated to rise to 278K versus 262K the prior week.
- Continuing Claims are estimated to rise to 2270K versus 2253K prior.
3:00 pm EST
- Consumer Credit for March is estimated at $15.8B versus $15.516B in February.
Upcoming Splits
Other Potential Market Movers
- The
German Factory Orders report, weekly Bloomberg Consumer Comfort Index,
weekly EIA natural gas inventory report, (ALK) annual meeting, (BID)
annual meeting and the (ETFC) annual meeting could also impact trading
today.
BOTTOM LINE: Asian indices are lower, weighed down by real estate
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 25% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Lower
- Sector Performance: Almost Every Sector Declining
- Volume: Slightly Above Average
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 16.30 +13.91%
- Euro/Yen Carry Return Index 141.50 +1.02%
- Emerging Markets Currency Volatility(VXY) 10.43 +.29%
- S&P 500 Implied Correlation 67.57 -.47%
- ISE Sentiment Index 66.0 -49.23%
- Total Put/Call 1.03 -15.57%
Credit Investor Angst:
- North American Investment Grade CDS Index 65.57 +2.71%
- America Energy Sector High-Yield CDS Index 1,076.0 -.31%
- European Financial Sector CDS Index 75.27 +1.50%
- Western Europe Sovereign Debt CDS Index 24.97 -.40%
- Asia Pacific Sovereign Debt CDS Index 59.80 -1.0%
- Emerging Market CDS Index 296.23 -.96%
- iBoxx Offshore RMB China Corporates High Yield Index 118.14 +.07%
- 2-Year Swap Spread 25.75 -.25 basis point
- TED Spread 27.50 +1.0 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -21.0 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 160.0 +5.0 basis points
- China Import Iron Ore Spot $60.89/Metric Tonne +3.73%
- Citi US Economic Surprise Index -67.30 -2.0 points
- Citi Eurozone Economic Surprise Index 19.0 +13.8 points
- Citi Emerging Markets Economic Surprise Index -18.0 +.1 point
- 10-Year TIPS Spread 1.91 -2.0 basis points
Overseas Futures:
- Nikkei Futures: Indicating -278 open in Japan
- DAX Futures: Indicating -27 open in Germany
Portfolio:
- Slightly Higher: On gains in my index hedges and emerging markets shorts
- Market Exposure: 25% Net Long
Bloomberg:
- ECB Mulls Tighter Greece Rules After 100 Days of Tspiras. (video) European Central Bank officials will debate tighter rules for the
liquidity that Greek lenders rely on for survival, two people familiar
with the matter said, a move that underscores the fragility of the
country’s financial system. The Governing Council will discuss Wednesday whether to raise
discounts on the collateral Greek banks pledge in exchange for emergency
funding, said the people, who are familiar with the agenda and asked
not to be identified. Governors will also review how much more Emergency
Liquidity Assistance to offer Greek banks.
- ECB Said to Raise Cap on Emergency Liquidity for Greek Banks. The European Central Bank increased the cap on emergency cash
available to Greek lenders as the nation continues to struggle with a
financial crisis, people familiar with the decision said. Policy makers meeting in Frankfurt on Wednesday raised the limit on
Emergency Liquidity Assistance by 2 billion euros ($2.3 billion) to 78.9
billion euros, the people said, asking not to be identified as the
meeting is private. ELA is offered by the Greek central bank against
lower quality collateral than the ECB typically accepts.
- German-Bond Investors Just Lost 25 Years of Yield in 14 Days. Exit bull, pursued by bear. Over the past couple of weeks, investors in German government bonds have
received a crash course in "duration," a geeky concept that is
nevertheless a driving force in fixed income.
- Ukrainian Army Suffers Deadliest Day in 3 Weeks in Blow to Truce. Ukraine’s military suffered its deadliest day since mid-April,
heaping further pressure on a shaky truce with pro-Russian militants in
its easternmost regions. Five servicemen were killed in the past 24 hours, four by a land mine
and one in an ambush, Defense Ministry spokesman Andriy Lysenko said
Wednesday. Twelve were injured, while the separatists target the town of
Shyrokyne, near the Mariupol port, he said. The rebels accused Ukraine
of breaking the cease-fire 55 times in the past day, including with
artillery.
- IMF Warns on EU Insurers’ Business Models as JPMorgan(JPM) Cuts. European life insurers’ business models are becoming unsustainable
after interest rates slumped across the continent, International
Monetary Fund analysts said. Low yields on government bonds mean euro-area firms are incurring
more financial stress than in recent tests by regulatory authorities,
when almost a quarter were unable to meet requirements, analysts
including Reinout De Bock and Andrea Maechler said in a report dated
Tuesday.
- Credit Markets Frothier Than in 2007: Byrne. (video)
- Shanghai Composite Going Back to 6,000, Matthews Says. (video)
- Indian Stocks Slump to Five-Month Low as Foreigners Extend Sales. Indian
stocks tumbled, with the benchmark index falling to its
lowest level this year, after block deals in index futures and foreign
funds extended the longest selloff in local shares this year. Bharat
Heavy Electricals Ltd., the top power-equipment maker, was the
biggest loser on the S&P BSE Sensex, while NTPC Ltd., the
largest
utility, fell the most in eight weeks. ICICI Bank Ltd. slid to a
three-month low, sending a gauge of lenders its sharpest loss since
April 27. The yield on sovereign bonds due 2024 climbed to a four-month
high and the rupee weakened. The Sensex plunged 2.6 percent to 26,717.37, the lowest close since
Dec. 17. The gauge briefly extended losses to more than 10 percent from
its Jan. 29 record, meeting the definition of correction, as more
investors seek more evidence that the government’s efforts to bolster
growth will lead to a revival in company profits. Foreigners sold $475
million of shares on Thursday and Monday, and have been sellers of CNX
Nifty futures since April 23.
- European Stocks Decline for a Second Day After Yellen’s Comments. European stocks slid for a second day, extending declines as the
euro strengthened and Federal Reserve Chair Janet Yellen said equity
market valuations are high.
The Stoxx Europe 600 Index slid 0.6 percent to 388.68 at the close of
trading, having swung between losses of 1 percent and gains of 0.3
percent.
- Yellen Says Equity-Market Valuations Are ‘Quite High’. Federal Reserve Chair Janet Yellen said equity-market valuations are
“quite high” and could be a potential source of financial instability. “I would highlight that equity-market valuations at this point
generally are quite high,” Yellen said in Washington on Wednesday in a
response to a question at a forum on finance. “Now, they’re not so high when you compare the returns on equities to
the returns on safe assets like bonds, which are also very low, but
there are potential dangers there.”
- Tesla's(TSLA) New Battery Doesn't Work That Well With Solar. Tesla
Chief Executive Elon Musk introduced a new family of batteries designed
to stretch the solar-power revolution into its next phase. There's just
one problem: Tesla's new battery doesn't work well with
rooftop solar—at least not yet. Even Solar City, the supplier led by
Musk, isn't ready to offer Tesla's battery for daily use.
Wall Street Journal:
MarketWatch.com:
Fox News:
- Purported ISIS warning claims terror cells in place in 15 states. (video) A grim online warning from a self-described American jihadist said
Sunday's terror attack in Texas was the work of ISIS and that the
terrorist group has scores of "trained soldiers" positioned in 15
states, awaiting orders to carry out more operations.
ZeroHedge:
Business Insider:
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -2.89% 2) Gaming -1.48% 3) Alt Energy -1.43%
Stocks Falling on Unusual Volume:
- WLKP, ACHC, ALXN, CMLP, TNET, FOSL, NDLS, VSI, ZU, DTLK, AXLL, HYGS, KONA, HAIN, RUBI, NWS, ENPH, STRA, ALL, NWSA, ZLTQ, MASI, AFAM, OTTR, TSU, OKS, INVN, SUPN, MYGN, EXAM, OKE, CMLP, NXTM, CHK, WAGE, ZLTQ, DDD and NWSA
Stocks With Unusual Put Option Activity:
- 1) JNK 2) KRE 3) CIEN 4) APC 5) FOSL
Stocks With Most Negative News Mentions:
- 1) ZU 2) NDLS 3) CTB 4) DDD 5) CHK
Charts:
