Style Underperformer:
Sector Underperformers:
- 1) Oil Service -3.62% 2) Gold & Silver -3.22% 3) Steel -2.27%
Stocks Falling on Unusual Volume:
- URBN, LINE, FGEN, ALDR, CDW, DKS, SSI, ICPT, ININ, WMT, VCYT, CSIQ, CCJ, I, WBK, RAX, LNCO, RAVN, NOAH, PSG, USLV, HD, VOD, HWAY, JOY and LOCO
Stocks With Unusual Put Option Activity:
- 1) AEO 2) WMT 3) KCG 4) CENX 5) RCL
Stocks With Most Negative News Mentions:
- 1) TSL 2) VALE 3) CRM 4) URBN 5) WDC
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Hospitals +2.06% 2) Banks +.99% 3) HMOs +.62%
Stocks Rising on Unusual Volume:
- MOMO, TTWO, RRGB, CMCM, ASNA, WBAI, KITE and BLUE
Stocks With Unusual Call Option Activity:
- 1) URBN 2) DRI 3) TTWO 4) NLY 5) OWW
Stocks With Most Positive News Mentions:
- 1) TTWO 2) PNRA 3) TJX 4) YUM 5) SYY
Charts:
Evening Headlines
Bloomberg:
- Islamic State Victory Threatens to Unravel Obama’s Iraq Strategy. Islamic
State’s seizure of the Iraqi city of Ramadi threatens to
unravel President Barack Obama’s strategy for defeating the Sunni
extremist group without sending U.S. ground troops back to Iraq.
Ramadi’s fall, two days after a U.S. general said Islamic State was
“losing” in Iraq, is the militants’ biggest success since they swept
across northern Iraq a
year ago. Deploying car bombs and executing dozens of pro-government
soldiers and civilians, the group raised its black banner over the
capital of Anbar province as government forces fled.
- Greek Leaders Say Deal Is Within Reach Amid Doubts by Creditors. Greek leaders expressed optimism a deal to unlock bailout funds is
within reach, in the face of continuing warnings by creditors that the
country has yet to comply with the terms of its emergency loans. “We are very close” to an agreement, Finance Minister Yanis
Varoufakis said in an interview late Monday with Greece’s Star TV
Channel. “I’d say it is a matter of one week.” Earlier Monday, Prime Minister Alexis Tsipras had told Greek
industrialists that “we are now at the final stretch before striking a
mutually beneficial agreement, after long and painful negotiations.”
- Which Stock Market Is Scarier: U.S. or China?
It’s scary stock-market ratio day! Bloomberg’s Lu Wang and Jennifer
Kaplan point out that economist James Tobin’s Q ratio -- companies’
market value divided by the replacement cost of their assets -- is
higher for U.S. companies “than any time other than the Internet bubble
and the 1929 peak.” Meanwhile, FT Alphaville tells of a Macquarie
report on margin lending in China, which now accounts for 8.9 percent of
the combined free float of the Shanghai and Shenzhen stock markets.
That “could already be the highest level of margins vs free float in
market
history.” What are we to make of these ominous-sounding measures?
Something. Definitely something.
- Most Asia Shares Gain as Bonds Extend Global Slide; Wheat Climbs. Most Asian shares rose following a record-setting day in the U.S.,
as bonds in the region tracked a resumption of selling in international
markets. Wheat extended gains near a five-week high, and crude oil
rallied.
The MSCI Asia Pacific Index climbed 0.2 percent by 11:13 a.m. in Tokyo, with five stocks climbing for every three that fell.
- Shale Poised to Pummel Another Market as U.S. LNG Plants Arrive. The U.S. is about to change the global LNG market forever. When the first tanker carrying liquefied natural gas from shale
fields leaves the Sabine Pass terminal in Louisiana in December, it will
turn consumers into traders with more bargaining power. That will
transform a market dominated by long-term contracts into one where spot
trading gains prominence, similar to crude oil.
- Funds Seen Driving China Commodity Trade Boom Defying Slowdown. Chinese hedge funds are helping drive a commodity-derivatives
trading boom in the world’s biggest energy, grains and metals consumer
that’s defying the worst economic growth in 25 years. Trading volumes across on the Shanghai Futures Exchange, China’s
biggest commodities bourse, surged 31 percent last year while activity
on exchanges in Zhengzhou and Dalian grew by 29 and 10 percent,
respectively. The expansion, compared with a 3.5 percent increase on the
London Metal Exchange, is being driven by a growing number of
investment funds nurtured by new regulations, according to Hu Yuyue, a
professor at Beijing Technology and Business University.
Wall Street Journal:
- Islamic State Solidifies Foothold in Libya to Expand Reach. Extremist group has sent money, trainers and fighters. Islamic State leaders in Syria have sent money, trainers and
fighters to Libya in increasing numbers, raising new concerns for the
U.S. that the militant group is gaining traction in its attempts to
broaden its reach and expand its influence. In recent months,
U.S. military officials said, Islamic State has solidified its foothold
in Libya as it searches for ways to capitalize on rising popularity
among extremist groups around the...
Fox News:
- ISIS capture of Ramadi renews concerns about US troop pullout, weapons left behind. (video) The Islamic State’s capture of the Iraqi city of Ramadi is sparking
renewed criticism of Obama administration policies in the region -- from
the decision to withdraw virtually all U.S. troops in 2011 to the
current anti-ISIS strategy that relies mostly on airstrikes. The fall Sunday of Ramadi, just 70 miles from Baghdad, marks the
second time in roughly a year that the extremist group has taken control
of a major Iraqi city -- after the United States spent nearly eight
years at war in the country.
CNBC:
Zero Hedge:
Business Insider:
Reuters:
Evening Recommendations
Night Trading
- Asian equity indices are -.25% to +1.0% on average.
- Asia Ex-Japan Investment Grade CDS Index 105.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 59.5 unch.
- NASDAQ 100 futures +.12%.
Morning Preview Links
Earnings of Note
Company/Estimate
Economic Releases
8:30 am EST
- Housing Starts for April are estimated to rise to 1015K versus 926K in March.
- Building Permits for April are estimated to rise to 1064K versus 1039K in March.
Upcoming Splits
Other Potential Market Movers
- The
Fed's Yellen at Financial Stability Oversight Council meeting, Fed's
Dudley speaking, UK CPI report, US weekly retail sales reports, Goldman
Sachs Basic Materials conference, JPMorgan Homebuilding/Building
Products conference, JPMorgan Tech/Media/Telecom conference, SunTrust
Robinson Humphrey Financial Services conference, (DDD) analyst event and
the (HAE) analyst meeting could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and real estate shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.
Broad Equity Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Most Sectors Rising
- Market Leading Stocks: Performing In Line
Equity Investor Angst:
- Volatility(VIX) 12.66 +2.26%
- Euro/Yen Carry Return Index 141.71 -.76%
- Emerging Markets Currency Volatility(VXY) 9.38 -.32%
- S&P 500 Implied Correlation 64.86 +1.58%
- ISE Sentiment Index 148.0 +64.4%
- Total Put/Call 1.0 +20.48%
Credit Investor Angst:
- North American Investment Grade CDS Index 63.0 +.41%
- America Energy Sector High-Yield CDS Index 1,068.0 +1.12%
- European Financial Sector CDS Index 74.41 +1.77%
- Western Europe Sovereign Debt CDS Index 22.37 +2.73%
- Asia Pacific Sovereign Debt CDS Index 59.40 +.02%
- Emerging Market CDS Index 286.62 -1.15%
- iBoxx Offshore RMB China Corporates High Yield Index 119.19 +.24%
- 2-Year Swap Spread 26.0 -.25 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -19.25 -.5 basis point
Economic Gauges:
- 3-Month T-Bill Yield .01% unch.
- Yield Curve 166.0 +6.0 basis points
- China Import Iron Ore Spot $60.65/Metric Tonne -1.08%
- Citi US Economic Surprise Index -72.4 -.8 point
- Citi Eurozone Economic Surprise Index .6 -1.3 points
- Citi Emerging Markets Economic Surprise Index -11.6 +2.4 points
- 10-Year TIPS Spread 1.88 +2.0 basis points
Overseas Futures:
- Nikkei 225 Futures: Indicating +55 open in Japan
- China A50 Futures: Indicating -134 open in China
- DAX Futures: Indicating +34 open in Germany
Portfolio:
- Higher: On gains in my tech/biotech/medical/retail sector longs and emerging markets shorts
- Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
- Market Exposure: Moved to 75% Net Long
Bloomberg:
- Greek Endgame Nears for Tsipras as Collateral Evaporates. (video) Greek banks are running short on the collateral they need to stay
alive, a crisis that could help force Prime Minister Alexis Tsipras’s
hand after weeks of brinkmanship with creditors. As deposits flee the financial system, lenders use collateral parked
at the Greek central bank to tap more and more emergency liquidity every
week. In a worst-case scenario, that lifeline will be maxed out within
three weeks, pushing banks toward insolvency, some economists say.
- Greek Bonds Tumble on Speculation Cash May Only Last a Few Weeks. Greek bonds plunged, pushing 10-year yields up to the highest since
April, as speculation grew that the nation’s financial system may be
just weeks away from running out of cash. The time remaining for Greece to strike a deal with its creditors is
“very limited,” European Union Economic Commissioner Pierre Moscovici
told reporters in Berlin Monday. The Greek government meanwhile repeated
its pre-conditions for any deal to be reached, saying it won’t yield
ground on its “red lines.”
- German Tourists Cool on Greece as ATMs at Risk of Crunch. Greece’s standoff with creditors is threatening the surge in tourism
that helped drag the country out of a six-year slump in 2014. A strong start to the year has tailed off in recent months with
potential visitors deterred by the risk of being caught up in a cash
crunch. Bookings from Germany were 0.7 percent higher than last year at
the end of the first quarter after jumping 12 percent in January,
prompting the Greek tourist lobby to consider ditching its forecast for a
record number of visitors this year.
- Emerging Stocks End Three-Day Advance Amid Shifting Fed Outlook. The Shanghai Composite Index declined for a second day as 20 initial
public offerings are due to come to market from Tuesday to Thursday,
stoking concern that funds will be lured from existing stocks. Lender
Banco Bradesco SA led Brazilian stocks lower. The real slumped for a
second day as most developing-nation currencies weakened against the
dollar. The Ibovespa fell 1.3 percent in Sao Paulo. Bradesco fell 3 percent, while Itau declined 2.1 percent.
- $100 Oil Seen Years Away by Petronas as Shale Output Resilient. The
rally in crude prices may not last as U.S. shale output remains robust,
according to Malaysia’s state oil company. “It will take many years
until we see oil prices anywhere near the
$100 mark,” Petroliam Nasional Bhd. President and Chief Executive
Officer Wan Zulkiflee Wan Ariffin said at a conference in Kuala Lumpur
on Monday. “We’ve underestimated the resilience of U.S. shale
production. ‘We’re still grappling our way to climb out of this big
drop.”
- China Steel Price Slumps to 12-Year Low as Seasonal Peak Passes. (graph) Chinese prices of steel used mostly to build homes and offices fell
to a 12-year low as peak construction season begins to ebb in the
world’s biggest consumer. The average spot price of steel reinforcement bar, or rebar, dropped
for a 10th day to 2,458 yuan ($396) a metric ton, the lowest level since
January 2003, according to data from Beijing Antaike Information
Development Co.
- Bubble Blowing to Continue So Long as Yellen Isn’t Raising Rates. Janet
Yellen will have to do more than talk about potential asset market
bubbles if she is to pop any. Days after Federal Reserve Chair Yellen’s
May 6 observation that
stock valuations are “quite high,” Citigroup Inc. strategists led by
Robert Buckland looked around the world at what central banks have done
in the past to rein in financial market excesses.
Their answer is that it usually takes at least three interest rate increases and as many as five to spark a slide in equities.
- Nobel Winner’s Math Is Showing S&P 500 Unhinged From Reality. If you sold every share of every company in the U.S. and used the
money to buy up all the factories, machines and inventory, you’d have
some cash left over. That, in a nutshell, is the math behind a bear case
on equities that says prices have outrun reality. The concept is embodied in a measure known as the Q ratio developed
by James Tobin, a Nobel Prize-winning economist at Yale University who
died in 2002. According to Tobin’s Q, equities in the U.S. are valued
about 10 percent above the cost of replacing their underlying assets --
higher than any time other than the Internet bubble and the 1929 peak.
CNBC:
- CEOs love buying stock with your money, not own. As CEOs buy a record amount of stock with shareholder money, they
are keeping their wallets in their pockets when it comes to purchasing
shares with their own cash. In the last six weeks, U.S. companies made buyback
announcements that came to $5.7 billion a day, according to TrimTabs
Investment Research. Yet in the month of April executives at those same companies bought
only $240 million worth of stock with their own money, the lowest level
of insider buying in more than two years. "Insider buying virtually
dried up in April, sending the insider sell/buy ratio to its highest
level in more than two years," noted the TrimTabs report. It's a troubling contrast that may speak to the
true feelings executives have about the staying power of this six-year
bull market.
ZeroHedge:
Business Insider:
Reuters:
- Iran deputy oil min says OPEC unlikely to cut output.
The Organisation of the Petroleum Exporting Countries (OPEC) is
unlikely to implement a production cut at its next meeting in June, a
senior Iranian official said on Monday. Asked if OPEC would cut
output at the upcoming June 5 meeting, Iran's Deputy Oil Minister
Rokneddin Javadi told Reuters: "I don't think so."
- Saudi Arabia's March oil exports highest in over 9 years - data. Saudi Arabia's crude exports rose
in March to their highest in almost a decade, official data
showed on Monday, a sign of unexpectedly strong global demand as
the top oil exporter revved up its output to the loftiest rate
on record. The OPEC heavyweight shipped 7.898 million barrels per day
(bpd) of crude in March, up from 7.350 million bpd in February
and 7.474 million bpd in January, figures supplied by Riyadh to
the Joint Organisations Data Initiative (JODI) showed.
