Thursday, June 11, 2015

Thursday Watch

Evening Headlines 
Bloomberg: 
  • Greek Pension Mess Shows There’s No Easy Way Out of Impasse. To find out why Greece’s pension system is tying negotiators up in knots, look no further than Maria Kounani, 59, a mother of two, single parent and early retiree. The maker of sewing patterns applied for a reduced pension last year, when the business where she’d worked for 20 years struggled with unpaid orders. To qualify for a full pension she needed to work another 10 years. She opted for early retirement, the only real choice she says she had, and one Greece’s creditors say is undermining the pension system. “I did it because no one is hiring me,” Kounani said. “They’re not even hiring my daughter who’s 39.” As Greek pensions become a key sticking point in talks with creditors, cases like Kounani show why there are no simple ways out. For creditors, the pension system is still too generous. For the Greek government, it’s a system struggling to cope after five years of recession and dwindling contributions in a nation with the European Union’s highest unemployment.
  • Greece Cut to CCC From CCC+ by S&P. (video)
  • Is the Next Detroit in China? Wenzhou is among the Chinese cities most heavily indebted and at risk of defaulting on its loans, according to Nomura Holdings Inc. Wenzhou is among the cities most heavily indebted and at risk of defaulting on its loans, according to Nomura Holdings Inc. In a new analysis described as one of the first of its kind, Nomura has dug into China's lending trail to see which cities and provinces are creaking under debt. They examined credit risks covering 30 provincial authorities and 265 cities. 
  • South Korea Cuts Key Rate to Record Low While MERS Spreads. The Bank of Korea lowered its key interest rate to an unprecedented low as the spread of Middle East respiratory syndrome risks derailing an economic recovery. The central bank cut the seven-day repurchase rate to 1.5 percent on Thursday, the fourth reduction since August 2014. The decision was forecast by 11 out of 18 analysts surveyed by Bloomberg. The rest had expected no change.  
  • Asian Stocks Follow U.S. Shares Higher Amid Optimism on Greece. Asian stocks rose for a second day, following U.S. shares higher amid optimism progress is being made in Greece’s debt talks. The MSCI Asia Pacific Index gained 0.4 percent to 147.54 as of 9:07 a.m. in Tokyo.
  • Leveraged Loans Tumble as Buyers Feel Impact of Shrinking Yields. Investors are getting tired of yields being squeezed on risky U.S. corporate loans this year. Leveraged loans dropped to their lowest level in four months amid a pullback by buyers stung by borrowers such as Dollar Tree Inc. and Goodyear Tire & Rubber Co., who have taken advantage of a paucity of new deals by seeking to lower payments on existing debt. Barclays Plc last week cut its 2015 forecast for U.S. leveraged-loan issuance to as little as $250 billion as regulatory scrutiny slows the pace of buyout financings.
  • Meredith Whitney Says She’s Done With Hedge Funds After Struggle. Meredith Whitney, who turned fame as a banking analyst into a stint running her own hedge fund, is through with managing other people’s money. “I think that chapter of my life is over,” she said in an interview with Fox Business on Wednesday. “This whole experience has been highly unfortunate and I’m putting it behind me.”
Wall Street Journal:
  • Bye, Bye, American History. Professors and historians urged opposition to the College Board’s new curriculum for teaching AP U.S. History.
Fox News: 
  • Bill Clinton contradicts Hillary on email claims. (video) Bill Clinton appeared Wednesday to contradict his wife's claims about their personal email use, saying he's only sent two emails in his life -- despite Hillary Clinton saying some of the private messages on her personal server were from her and her husband.
CNBC:
  • World Bank pares global growth forecast. The World Bank trimmed its global economic growth outlook on Wednesday, warning that developing markets faced a raft of headwinds ranging from lower commodity prices to the prospect of higher borrowing costs. The Washington-based lender now expects the world economy to expand 2.8 percent in 2015, down from its January projection of 3 percent, according to its bi-annual Global Economic Prospects (GEP) report. It maintained its growth forecasts for 2016 and 2017 at 3.3 percent and 3.2 percent, respectively.
Zero Hedge: 
Business Insider:
Telegraph:
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are .unch to +1.0% on average.
  • Asia Ex-Japan Investment Grade CDS Index 109.0 -2.0 basis points.
  • Asia Pacific Sovereign CDS Index 61.75 -1.25 basis points.
  • S&P 500 futures -.15%.
  • NASDAQ 100 futures -.13%.

Earnings of Note
Company/Estimate
  • (BOJA)/.15
  • (XONE)/-.33
  • (KFY)/.47
  • (RH)/.20
Economic Releases
8:30 am EST
  • Retail Sales Advance for May are estimated to rise +1.2% versus unch. in April.
  • Retail Sales Ex Autos for May are estimated to rise +.8% versus a +.1% gain in April.
  • Retail Sales Ex Autos and Gas for May are estimated to rise +.5% versus a +.2% gain in April.
  • The Import Price Index for May is estimated to rise +.8% versus a -.3% decline in April.
  • Initial Jobless Claims are estimated to fall to 275K versus 276K the prior week.
  • Continuing Claims are estimated to fall to 2190K versus 2196K prior.
10:00 am EST
  • Business Inventories for April are estimated to rise +.2% versus a +.1% gain in March.
12:00 pm EST
  • Household Change in Net Worth for 1Q.
Upcoming Splits
  • (MPC) 2-for-1
  • (ROST) 2-for-1
Other Potential Market Movers
  • The China Industrial Production report, Bloomberg US Economic Survey for June, weekly EIA natural gas inventory report, weekly Bloomberg Consumer Comfort Index, (HRL) investor day and the (DHR) analyst event could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and industrial shares in the region. I expect US stocks to open modestly lower and to rally into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the day.

Wednesday, June 10, 2015

Stocks Surging into Final Hour on Less Eurozone Debt Angst, Diminished Global Growth Fears, Oil Rise, Energy/Insurance Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Higher
  • Sector Performance: Almost Every Sector Rising
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 13.18 -8.91%
  • Euro/Yen Carry Return Index 144.98 -1.08%
  • Emerging Markets Currency Volatility(VXY) 9.48 -1.25%
  • S&P 500 Implied Correlation 60.56 -3.75%
  • ISE Sentiment Index 125.0 +31.58%
  • Total Put/Call .58 -34.83%
  • NYSE Arms .52 -15.34% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 65.58 -3.12%
  • America Energy Sector High-Yield CDS Index 1,526.0 +1.14%
  • European Financial Sector CDS Index 77.26 -3.12%
  • Western Europe Sovereign Debt CDS Index 23.39 -1.60%
  • Asia Pacific Sovereign Debt CDS Index 61.78 -1.81%
  • Emerging Market CDS Index 313.38 -.91%
  • iBoxx Offshore RMB China Corporates High Yield Index 120.18 +.01%
  • 2-Year Swap Spread 25.75 +.25 basis point.
  • TED Spread 27.25 +.25 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -17.0 unch.
Economic Gauges:
  • 3-Month T-Bill Yield .02% +1.0 basis point
  • Yield Curve 175.0 +4.0 basis points
  • China Import Iron Ore Spot $65.39/Metric Tonne +1.74%
  • Citi US Economic Surprise Index -41.20 +1.5 points
  • Citi Eurozone Economic Surprise Index 4.0 -1.9 points
  • Citi Emerging Markets Economic Surprise Index -17.60 unch.
  • 10-Year TIPS Spread 1.89 -1.0 basis point
Overseas Futures:
  • Nikkei 225 Futures: Indicating +174 open in Japan 
  • China A50 Futures: Indicating -231 open in China
  • DAX Futures: Indicating +24 open in Germany
Portfolio: 
  • Higher: On gains in my tech/retail/biotech/medical sector longs 
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 75% Net Long

Bull Radar

Style Outperformer:
  • Small-Cap Value +1.22%
Sector Outperformers:
  • 1) Tobacco +2.99% 2) Steel +2.73% 3) Insurance +2.15%
Stocks Rising on Unusual Volume:
  • HCC, HRTX, KYTH, VNET, NFLX, DYN, DSKY, WETF, JCI, CY, LPLA, GNC and RCPT
Stocks With Unusual Call Option Activity:
  • 1) JCI 2) EXC 3) RMD 4) HP 5) NRG
Stocks With Most Positive News Mentions:
  • 1) TGT 2) V 3) EV 4) EXC 5) SABR
Charts:

Morning Market Internals

NYSE Composite Index:

Tuesday, June 09, 2015

Wednesday Watch

Evening Headlines 
Bloomberg: 
  • The Key Gauge of Abe’s Japan Inc. Revival Is Going the Wrong Way. The key yardstick of Prime Minister Shinzo Abe’s drive to make Japanese companies more profitable is heading in the wrong direction. The Topix index’s return on equity fell to 8.2 percent at the end of March from 8.6 percent a year earlier, according to data compiled by Bloomberg after the latest annual reporting season. The measure of income relative to shareholder capital, a buzzword for companies and investors in the Abe era, is retreating after surging in the early part of his term.
  • Protesters Are Now Everywhere in Latin America as the Boom Fades. From Mexico to Chile, Latin Americans frustrated with scandals, stagnant economies and government incompetence are taking to the streets. Often they are protesting the very populist leaders they rallied around over the past decade, when rising wealth from a commodities boom fueled a surge in government spending and helped mask corruption.
  • Vietnam Confronts Debt Surge Echoing China’s as Growth at Stake. For decades, Vietnam has modeled its growth after China’s, with a state-enterprise driven economy and a push toward low-cost manufacturing. Now, the Southeast Asian nation is trying to avoid the debt pitfalls of its larger neighbor. Vietnam’s national debt is rising too quickly, said Nguyen Duc Kien, deputy head of the National Assembly Economic Committee. It may climb to a record 64 percent of gross domestic product by the end of 2015 from 60 percent last year, he said, a forecast that includes government-guaranteed liabilities that ratings companies leave out in their assessments. 
  • China Stocks Fall Most in Two Weeks After MSCI Rejects A Shares. China’s stocks fell the most in almost two weeks, led by industrial and commodity companies, after MSCI Inc. held off from adding mainland shares to its benchmark indexes. CRRC Corp., formed by merging Chinese rail companies CSR Corp. and China CNR Corp., slumped more than 5 percent for a second day as industrial companies retreated before the release of production data on Thursday. Jiangxi Copper Co. and coal producer China Shenhua Energy Co. declined more than 2 percent. The Shanghai Composite Index slid 1.8 percent to 5,024.18 at 9:34 a.m.
  • Asia Stocks Swing as Energy Producers Rise, Consumer Shares Fall. Asian stocks swung between gains and losses as energy companies advanced and consumer shares slid. The MSCI Asia Pacific Index was little changed at 146.12 as of 9:16 a.m. in Tokyo after rising as much as 0.1 percent and falling less than 0.1 percent.
Wall Street Journal: 
Fox News:
  • ISIS captures 88 Eritrean Christians in Libya, US official confirms. (video) The ISIS terror group kidnapped 88 Eritrean Christians from a people-smugglers' caravan in Libya last week, a U.S. defense official confirmed Monday. The defense official confirmed initial reports of the mass kidnapping to Fox News after seeing a recent intelligence report. The independent Libya Herald newspaper reported that the convoy was ambushed by militants south of Tripoli before dawn this past Wednesday morning.
CNBC: 
Zero Hedge:
Business Insider: 
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -.50% to +.75% on average.
  • Asia Ex-Japan Investment Grade CDS Index 111.0 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 63.0 unch.
  • S&P 500 futures +.15%.
  • NASDAQ 100 futures +.11%.

Earnings of Note
Company/Estimate
  • (KKD)/.22
  • (MW)/.51
  • (BOX)/-.29
Economic Releases
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory decline of -1,272,730 barrels versus a -1,948,000 barrel decline the prior week. Gasoline supplies are estimated to fall by -554,550 barrels versus a -334,000 barrel decline the prior week. Distillate inventories are estimated to rise by +845,360 barrels versus a +3,773,000 barrel gain the prior week. Finally, Refinery Utilization is estimated to rise by +.1% versus a -.4% decline the prior week.
2:00 pm EST
  • The Monthly Budget Deficit for May is estimated at -$97.0B versus -$130.0B in April.
Upcoming Splits
  • (MPC) 2-for-1
  • (ROST) 2-for-1
Other Potential Market Movers
  • The UK Production report, Wasde Crop report, weekly MBA mortgage applications report and the (TGT) annual meeting could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology 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.

Stocks Slightly Higher into Final Hour on Greece Deal Hopes, Diminished Global Growth Fears, Oil Bounce, Financial/Hospital Sector Strength

Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Mixed
  • Volume: Below Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 14.82 -3.07%
  • Euro/Yen Carry Return Index 146.66 -.13%
  • Emerging Markets Currency Volatility(VXY) 9.61 -1.03%
  • S&P 500 Implied Correlation 62.61 -2.63%
  • ISE Sentiment Index 96.0 +7.87%
  • Total Put/Call .91 -9.90%
  • NYSE Arms .55 -50.30% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 67.73 -.75%
  • America Energy Sector High-Yield CDS Index 1,510.0 +29.26%
  • European Financial Sector CDS Index 79.73 +1.01%
  • Western Europe Sovereign Debt CDS Index 23.77 +1.65%
  • Asia Pacific Sovereign Debt CDS Index 63.42 +.62%
  • Emerging Market CDS Index 315.24 +.73%
  • iBoxx Offshore RMB China Corporates High Yield Index 120.17 -.04%
  • 2-Year Swap Spread 25.5 +.75 unch.
  • TED Spread 27.0 +.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -17.0 -.75 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .01% unch.
  • Yield Curve 171.0 +1.0 basis point
  • China Import Iron Ore Spot $64.27/Metric Tonne -.11%
  • Citi US Economic Surprise Index -42.70 +1.9 points
  • Citi Eurozone Economic Surprise Index 5.90 -.3 point
  • Citi Emerging Markets Economic Surprise Index -17.60 unch.
  • 10-Year TIPS Spread 1.90 +2.0 basis points
Overseas Futures:
  • Nikkei 225 Futures: Indicating +163 open in Japan 
  • China A50 Futures: Indicating -442 open in China
  • DAX Futures: Indicating -24 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my tech sector longs and emerging markets shorts
  • Disclosed Trades: Covered some of my (IWM)/(QQQ) hedges
  • Market Exposure: Moved to 50% Net Long