Friday, July 24, 2015

Bull Radar

Style Outperformer:
  • Large-Cap Growth -.63%
Sector Outperformers:
  • 1) Internet +2.09% 2) Networking +1.78% 3) Utilities +.19%
Stocks Rising on Unusual Volume:
  • SFG, IEK, LOGM, QLLK, AMZN, MKTO, NTGR, JNPR, P, ATHN, N, MXIM, HIFR and CBI
Stocks With Unusual Call Option Activity:
  • 1) DNR 2) COF 3) EIX 4) CHTR 5) TRIP
Stocks With Most Positive News Mentions:
  • 1) JNPR 2) AMZN 3) P 4) T 5) SFG
Charts:

Morning Market Internals

NYSE Composite Index:

Friday Watch

Evening Headlines 
Bloomberg: 
  • Lagarde Push for Greece Debt Relief Sets Up Showdown With Merkel. Now that Greece is eligible again for loans from the IMF, getting any more money from the fund may hinge on a test of wills between Christine Lagarde and Angela Merkel. The bailout of as much as 86 billion euros ($95 billion) proposed by European leaders this month assumes financing from the International Monetary Fund and is conditional on Greece seeking a new loan program from the IMF once the current one expires in March. The Washington-based IMF, which requires borrowers to have sustainable debt, has made clear it won’t ask its 187 other member nations to approve a deal until euro-area states significantly ease terms on existing loans. 
  • Former Chinese Regulator Criticizes Government Stock Rescue. Gao Xiqing, an architect of China’s stock market and a former top regulator, said policy makers helped inflate equity prices and then mishandled the response to a collapse that wiped out $4 trillion in less than a month. “I don’t see so much of a problem in the reduction of the market value,” Gao, former vice chairman of the China Securities Regulatory Commission, said at a panel discussion at the Council on Foreign Relations in New York. “I worry a lot more about the way it happened and how you deal with it.” 
  • The Meaning of China’s Stock Market Intervention. The government’s decision to prop up slumping markets may well signal a comeback for centralization. The spectacle of the stock market meltdown in China has led many analysts and investors to see an upside to the downturn. The slump is “the most serious crisis” facing President Xi Jinping “since he came to power,” China commentator Willy Lam told an audience of academics in Vancouver on July 10. “It will require a lot to restore people’s confidence in the regime.” Volatility might force the state to clean up the unregulated loans fueling stock purchases and to intervene less in equity markets and the broader economy. The drop might even foster massive discontent with the Communist Party and support for real political reform. That’s because in China, unlike other major nations where large institutions dominate the markets, retail investors—90 million or so individuals, most of them belonging to the urban elite—do most of the investing. 
  • Abe Battles to Prevent Support Slipping Toward Danger Zone. Spending hours defending his security policies on television, scrapping a $2 billion Olympic stadium plan and playing up concerns about China, Japanese Prime Minister Shinzo Abe is battling to claw back a slide in support. His approval rating plunged below 40 percent in polls taken after he pushed bills through parliament last week to expand the role of Japan’s military. While he’s at no immediate risk of being ousted, he must avoid dropping into the danger zone around the 20 percent mark at which successive premiers have been toppled at the ballot box or by their party. 
  • Aussie Drops to Six-Year Low as Kiwi Falls After China Flash PMI. The Australian dollar dropped to a six-year low and the New Zealand dollar also retreated after a gauge of Chinese manufacturing activity unexpectedly slipped to the weakest in more than a year. The Aussie weakened at least 0.4 percent against its 10 major developed peers after the Caixin Media and Markit Economics’ flash manufacturing purchasing managers’ index showed a greater-than-expected slump in July. China is a key export market for both South Pacific nations.
  • Chinese Stocks Slump in Hong Kong as PMI Spurs Growth Concerns. Chinese stocks dropped in Hong Kong, with the benchmark index falling for a sixth week, after a private gauge of manufacturing in the nation unexpectedly declined to the lowest level in 15 months. The Hang Seng China Enterprises Index slumped 1.3 percent to 11,678.54 at 10:56 a.m. local time, extending its retreat this week to 1.4 percent.
  • Oil Turning Back to Bear Erases $100 Billion From Shale Drillers. Oil slipped back into a bear market Thursday, disappointing U.S. shale drillers that pinned their hopes on higher prices. West Texas Intermediate, the benchmark U.S. contract, tumbled 21 percent since June 10 to $48.45 a barrel, erasing more than $100 billion in market value from the companies in the Bloomberg Intelligence North America Independent Explorers and Producers Index. 
  • Copper Goes From Bad to Worse as Prices Tumble to Six-Year Low. A bad week for copper just got worse as futures tumbled to a six-year low in New York and Goldman Sachs Group Inc. forecast prices will drop another 15 percent by years end. The rout is driving down share prices and increasing pressure on miners to trim costs. Freeport-McMoRan Inc., the biggest publicly traded producer of the metal, fell the most in six months after an earnings conference call left investors uncertain on the company’s direction.
  • Retailers’ Answer to Apple(AAPL) Pay Is Said to Hit Stores in August. After almost three years in development, the retail industry’s answer to Apple Pay is finally getting off the ground. A mobile payment application developed by Merchant Customer Exchange -- a company founded in August 2012 with funding from Wal-Mart Stores Inc., Target Corp. and Best Buy Co. -- has been tested by employees of the retailers and will get a limited trial run next month in stores, according to three people familiar with the situation. That means shoppers will soon be able to use the technology, called CurrentC, to pay for items with their phones.
  • Dunkin’ Donuts Slams New York Regulators Over Wage Increase. Dunkin’ Brands Group Inc., the owner of Dunkin’ Donuts, upbraided New York regulators over a plan to boost fast-food wages to $15 an hour, a move the company said could lead to price increases. A wage board formed by Governor Andrew Cuomo arrived at the decision without involvement from the restaurant industry, Dunkin’ Chief Executive Officer Nigel Travis said on a conference call Thursday.
Wall Street Journal: 
  • Turkey to Let U.S. Military Use Its Base to Launch Strikes Against Islamic State. Agreement allows U.S. to operate manned, unmanned planes from air base near Syrian border. Turkey agreed to allow the U.S. to use air bases there to launch strikes against Islamic State forces in neighboring Syria, a major shift long sought by Washington and sealed hours before a deadly clash between Turkish forces and militants across the border.
  • Unlucky Emerging Markets Don’t Get Lift From Weak Currency. The bright side of a currency decline is supposed to be rising exports. But in key emerging markets around the world, that isn’t happening. The bright side of a currency decline is supposed to be rising exports. But in key emerging markets around the world, that isn’t happening. Currencies in some countries are hitting new lows, down as much as 30% in the past 2½ years. Meanwhile, emerging-market export growth has fallen to its lowest levels in more than half a decade. Exports themselves fell 14.3% year over year in the three months...
  • Senators Voice Skepticism on Iran Nuclear Deal. Republican in tense committee hearing says Obama administration had been ‘fleeced’. Lawmakers sharply clashed with Obama administration officials Thursday over the landmark nuclear agreement with Iran in a hearing that marked the start of and set the tone for two months of heated political debate.
Fox News: 
  • ISIS Netted Up to $1B in Cash After Taking Over Mosul, US Official Says. ISIS netted between $500 million and $1 billion in cash when it took over Iraq’s second largest city in 2014, a top Obama administration official said Thursday. Daniel Glaser, the U.S. Treasury’s assistant secretary for terror financing, told participants at the Aspen Security Forum that when ISIS swept through the city of Mosul in northern Iraq, it took the reserves of over 90 banks, estimated to be between $500 million and $1 billion.
MarketWatch.com: 
  • The true cost of China’s multibillion-dollar market intervention. Beijing estimated to have spent 10% of GDP to support market. As the Shanghai Composite Index dove and panic sales spread, the Chinese government spent billions of dollars to soothe battered sentiment and shore up the stock market. But China may eventually end up paying a much higher price from delayed reforms and a distorted stock market, analysts say.
CNBC:
  • Starbucks stock pops on earnings beat, buyback news. (video) The coffee chain reported quarterly earnings and revenue that beat analysts' expectations on Thursday. Starbucks posted fiscal third-quarter earnings of 42 cents per share on $4.88 billion in revenue. Analysts forecast Starbucks would report earnings of 41 cents a share on $4.86 billion in revenue, according to a consensus estimate from Thomson Reuters. After the earnings announcement, the company's shares rose more than 5 percent in extended-hours trading. The coffee giant is trading well above its $57 all-time high at current extended-hours levels
Zero Hedge:
Business Insider:
  • Millennials are thinking hard about leaning out. A survey of Harvard Business School alumni, released as part of the school’s new gender initiative, found that 37 percent of millennial women and 42 percent of those already married planned to interrupt their career for family. That compared with 28 percent of Generation X women and 17 percent of baby boomers.
  • Report: Teen use of the morning-after pill is climbing. More than 1 in 5 sexually active teen girls have used the morning-after pill - a dramatic increase that likely reflects that it's easier now for teens to buy the emergency contraceptive. A report released Wednesday shows teen use of the morning-after pill rose steadily from a decade earlier, when it was 1 in 12. Now, all teens can buy it without a prescription.
Reuters:
  • Caterpillar(CAT) sees end of good times, moves into cost-cutting mode. Caterpillar Inc rode the boom markets in China, Brazil and piggybacked the oil industry to rich profits, but the world's biggest construction and mining equipment company effectively declared the good times over on Thursday, warning of an extended period of retrenchment. Facing slowdowns in developing markets, a static oil industry and a strong U.S. dollar suppressing overseas earnings, Caterpillar said it was pruning operations and cutting costs to adapt.
Evening Recommendations 
  • None of note
Night Trading
  • Asian equity indices are -1.0% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 108.0 +2.0 basis points.
  • Asia Pacific Sovereign CDS Index 59.5 +.5 basis point.
  • S&P 500 futures -.02%.
  • NASDAQ 100 futures +.06%.

Earnings of Note
Company/Estimate
  • (AAN)/.45
  • (AAL)/2.60
  • (B)/.61
  • (BIIB)/4.10
  • (COG)/.03
  • (ECA)/-.15
  • (FLIR)/.37
  • (JCI)/.90
  • (LEA)/2.48
  • (MCO)/1.22
  • (COL)/1.30
  • (SPG)/2.38
  • (SAVE)/1.01
  • (STT)/1.37
  • (VFC)/.36
  • (VTR)/1.16
Economic Releases
9:45 am EST
  • Preliminary Markit US Manufacturing PMI for July is estimated at 53.6 versus 53.6 in June.
10:00 am EST
  • New Home Sales for June are estimated to rise to 548K versus 546K in May.
Upcoming Splits
  • (ETE) 2-for-1
  • (AZN) 2-for-1
Other Potential Market Movers
  • The Eurozone PMI report and the (SCHW) business update could also impact trading today.
BOTTOM LINE: Asian indices are 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 25% net long heading into the day.

Thursday, July 23, 2015

Stocks Reversing Lower into Final Hour on Global Growth Fears, Fed Rate Hike Worries, Rising Emerging Markets Debt Angst and Transport/Utilities Sector Weakness

Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Most Sectors Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 12.84 +5.94%
  • Euro/Yen Carry Return Index 142.26 +.52%
  • Emerging Markets Currency Volatility(VXY) 8.77 +4.53%
  • S&P 500 Implied Correlation 60.08 +2.16%
  • ISE Sentiment Index 94.0 +2.17%
  • Total Put/Call .94 +10.59%
  • NYSE Arms 1.15 +19.21% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 69.94 +2.18%
  • America Energy Sector High-Yield CDS Index 1,600.0 +4.85%
  • European Financial Sector CDS Index 69.19-.35%
  • Western Europe Sovereign Debt CDS Index 21.80 -2.57%
  • Asia Pacific Sovereign Debt CDS Index 59.44 +.73%
  • Emerging Market CDS Index 315.57 +3.25%
  • iBoxx Offshore RMB China Corporates High Yield Index 120.63 +.17%
  • 2-Year Swap Spread 25.25 -.25 basis point
  • TED Spread 26.25 -.25 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -20.0 +.5 basis point
Economic Gauges:
  • 3-Month T-Bill Yield .04% +1.0 basis point
  • Yield Curve 158.0 -4.0 basis points
  • China Import Iron Ore Spot $51.72/Metric Tonne -.08%
  • Citi US Economic Surprise Index -7.0 +5.3 points
  • Citi Eurozone Economic Surprise Index 8.6 -.1 point
  • Citi Emerging Markets Economic Surprise Index -9.1 +.8 point
  • 10-Year TIPS Spread 1.77 -4.0 basis points
  • # of Months to 1st Fed Rate Hike(Morgan Stanley) 5.21 -.03
Overseas Futures:
  • Nikkei 225 Futures: Indicating -134 open in Japan 
  • China A50 Futures: Indicating -163 open in China
  • DAX Futures: Indicating -62 open in Germany
Portfolio: 
  • Slightly Higher: On gains in my index hedges and emerging markets shorts
  • Disclosed Trades: None
  • Market Exposure: 25% Net Long

Today's Headlines

Bloomberg:
  • Sluggish Global Sales Damp U.S. Earnings From Caterpillar(CAT) to 3M(MMM). Sluggish international markets are damping earnings at U.S. industrials giants. Caterpillar Inc., the largest manufacturer of construction and mining machinery, cut its full-year sales forecast Thursday, saying important end-user industries remain weak. 3M Co. reduced the top end of its 2015 profit and revenue, citing lower-than-expected global economic growth. The earnings season has been spotty for U.S. companies so far. Earnings per share at Standard & Poor’s 500 Index companies probably slumped 5.3 percent in the second quarter, according to analysts’ estimates, weighed down by tumbling oil and commodities prices and slow global economic growth. Excluding the energy industry, S&P 500 profits rose just 1.5 percent, analysts estimate.
  • Japan’s Debt Risks Surge to Triple GDP Without Change, IMF Says. Japan’s debt is unsustainable and could climb to almost three times the size of its economy by 2030 unless the government does more to cut its budget, the International Monetary Fund said. The government should consider rules to curb spending, limits on extra budgets and independent assessments of its projections, the IMF said. Reliance on optimistic economic assumptions risks harming confidence in its plan to put the budget into surplus, excluding interest payments, by 2020, according to a report released on Thursday in Washington.  
  • Real Slumps to Four-Month Low Amid Brazilian Budget Capitulation. Brazil’s real sank to a four-month low and led global declines after the government said it will fail to meet its fiscal targets, adding to concern the nation is facing a credit downgrade. The real dropped 1.9 percent to 3.2866 per dollar at 1:03 p.m. in Sao Paulo, the weakest level on a closing basis since March 19. The decline was the biggest among 31 major currencies tracked by Bloomberg.
  • Emerging Stocks, Currencies Drop on Fed Outlook After Jobs. Emerging-market stocks and currencies fell for a second day as a plunge in U.S. jobless claims bolstered the case for the Federal Reserve to increase the near-zero interest rates that have supported demand for riskier assets. The real sank to a 12-year low as Brazil’s finance minister lowered the government’s fiscal target, adding to concern the nation is facing a credit downgrade. OAO Gazprom led Russian energy producers lower as oil traded near the lowest level in three months. Turkish stocks and the lira declined amid more violence near the Syrian border. Chinese stocks rose for a sixth day and volatility fell as traders bet government intervention to support equities is working. The MSCI Emerging Markets Index fell 0.7 percent to 924.35 at 11:30 a.m. in New York.
  • European Stocks Decline as Energy Drop Outweighs Credit Suisse. (video) European stocks fell for a third day as a decline in energy shares outweighed better-than-expected results from Credit Suisse Group AG and Unilever. Oil-and-gas stocks contributed the most to the Stoxx Europe 600 Index’s drop, with BP Plc retreating 1.4 percent. Credit Suisse rose 6.2 percent after quarterly profit beat estimates. Unilever climbed 1.6 percent after the maker of Magnum ice cream reported higher-than-forecast sales growth. The Stoxx 600 slid 0.5 percent to 398.1 at the close of trading, after earlier rising as much as 0.6 percent. The volume of shares changing hands was 18 percent lower than the 30-day average. 
  • World’s Top Iron-Ore Miner Presses on Output as Price Slide. Vale SA boosted iron-ore production last quarter to the second-highest ever for the company, exceeding analyst estimates and worsening a supply glut that saw prices of the steelmaking ingredient collapse. Iron-ore output rose 7.4 percent to 85.3 million metric tons in the quarter through June 30, compared with 79.4 million tons a year ago, the company said in a statement Thursday. The result, which excludes third-party purchases and operations at a venture with BHP Billiton Plc, topped the 82.5 million-ton average of eight analyst estimates compiled by Bloomberg.
  • Oil Warning: The Crash Could Be the Worst in More Than 45 Years. (video) There's only one thing holding back a price rebound. It's a big thing. Morgan Stanley has been pretty pessimistic about oil prices in 2015, drawing comparisons with the some of the worst oil slumps of the past three decades. The current downturn could even rival the iconic price crash of 1986, analysts had warned—but definitely no worse. This week, a revision: It could be much worse.
  • Moody’s Says Low Oil Price Here to Stay as Russia Bleeds Capital. Low oil prices are just the tip of what ails Russia, according to Moody’s Investors Service. With its dependence on commodities and a slump in investment, Russia will have a hard time recovering from its record economic slump as global oil prices are bound to remain lower for a long time, Yves Lemay, managing director in the sovereign risk group at Moody’s in London, said in an interview on Wednesday. As much as a quarter of Russia’s gross domestic product and two-thirds of its exports are linked to the energy industry, according to the rating company.
  • Oil Rigs Left Idling Turn Caribbean Into Expensive Parking Lot. Imagine parking your $300 million boat for months out in the open sea, with well-paid mechanics hovering around it and the engine running. The Gulf of Mexico and the Caribbean Sea have become a garage for deepwater drillships -- at a cost of about $70,000 a day each. It’s either that or send your precious rig to a scrapyard. The dilemma underscores how an offshore industry that geared up for an oil boom is grappling with a bust.
  • Nikkei to Buy Pearson's FT for $1.3 Billion. (video) After almost six decades of stewardship of one of Britain’s most storied institutions -- the Financial Times -- Pearson Plc is selling the business daily to Japan’s biggest financial news group.
ZeroHedge:
Telegraph:
Deutschlandfunk:
  • German Lawmaker 'Skeptical' About Greek Reforms. German lawmaker Gunther Krichbaum says he's "skeptical" that Greek reform steps passed in parliament will be fully implemented, citing an interview. Negotiations with Greek govt about a third bailout program will be "very, very difficult," outcome is open. Says he's skeptical that Greek govt will take "ownership" of reform steps, citing comments by Greek Prime Minister Alexis Tsipras that govt was forced to agree to reforms it doesn't believe in.

Bear Radar

Style Underperformer:
  • Small-Cap Value -1.34%
Sector Underperformers:
  • 1) Gold & Silver -4.06% 2) Road & Rail -3.51% 3) Oil Tankers -2.71%
Stocks Falling on Unusual Volume:
  • DFRG, CUBI, SCSS, CVA, CAB, DST, LHO, URI, QSII, RDUS, TBI, WCC, DGLY, BCC, DNKN, DLB, HDS, NTCT, R, FCX, CFX, CHSP, HZO, WRLD, IVC, AXP, HLT, HST, IDXX, TCBI, CAT, MMM, DFS, BKS, COP, CHSP, DOW, GMT, ZFGN, R, WCC, UNP, DYN, ADS, PEB, HTZ, FCX, HEES, LHO and WRLD
Stocks With Unusual Put Option Activity:
  • 1) PTEN 2) JNPR 3) AXP 4) GPS 5) CAT
Stocks With Most Negative News Mentions:
  • 1) STJ 2) HTZ 3) CAT 4) UNP 5) QCOM
Charts: