Monday, August 03, 2015

Bear Radar

Style Underperformer:
  • Small-Cap Value -.40%
Sector Underperformers:
  • 1) Coal -4.40% 2) Computer Services -1.36% 3) Disk Drives -1.31%
Stocks Falling on Unusual Volume:
  • TREX, TSN, NEP, BSFT, BERY, COLM, NBHC, GPX, TSNU, ANFI, CPSI, TCX, HBI, SHLD, LNKD, CTRN, OUTR, DPM, CVX, ITG, SSYS, VNR, BSTC, SIMO, ENH, STRZA, NEWM, COH, RL, IMMR, TERP, ITG, DDD, VDSI, FOSL, TASR, HMSY, SSYS, BSFT, SHLD, AAC and BKS
Stocks With Unusual Put Option Activity:
  • 1) BEN 2) OIL 3) ADSK 4) DIS 5) FOSL
Stocks With Most Negative News Mentions:
  • 1) COH 2) IMGN 3) CVX 4) TSN 5) KORS
Charts:

Bull Radar

Style Outperformer:
  • Large-Cap Growth -.22%
Sector Outperformers:
  • 1) Airlines +1.45% 2) Hospitals +.89% 3) Utilities +.51%
Stocks Rising on Unusual Volume:
  • LXRX, PRE, DGI, CDW, SHAK and FIT
Stocks With Unusual Call Option Activity:
  • 1) ED 2) IDTI 3) WM 4) CERN 5) SGMS
Stocks With Most Positive News Mentions:
  • 1) FCAU 2) LXRX 3) CLX 4) CERN 5) CCE
Charts:

Morning Market Internals

NYSE Composite Index:

Sunday, August 02, 2015

Monday Watch

Today's Headlines 
Bloomberg:
  • Meet China’s Stock Rescue Chief: He Never Saw the Crisis Coming. After China’s stocks crashed in June, the government put more than $400 billion at the disposal of a little-known state agency, the China Securities Finance Corp., headed by an academic and bureaucrat named Nie Qingping. It was told to save the market. The agency’s unique mandate is to intervene in the market to buy stocks, with money borrowed from the central bank and other sources, in order to help prop up share prices. With the recent volatility evidenced by another crash on July 27, its success so far isn’t readily apparent. Nie, the 53-year-old chairman, hasn’t given interviews on his emergency role, and the government hasn’t spelled out exactly what discretion Nie and his agency have when executing orders from above. Four weeks into the new role, the picture emerging from Nie’s published books and commentaries, as well as interviews with fellow academics, is of a professor with 25 years of experience watching stock manias -- who still got blindsided by China’s latest crisis.
  • China Car Sales Drop Flashes Yellow Light for Its Economy. When China’s economy was booming, motorists became a symbol of the nation’s new spending power. Now, falling car sales may be more a symbol of China’s steady deceleration. Voracious demand saw China overtake the U.S. as the world’s biggest car market in 2009, spurring auto giants including Ford Motor Co. and Volkswagen AG to supercharge their production in the country. By contrast, Ford now sees a potential decline in auto sales in China for the first time in 17 years. Volkswagen suffered its first sales drop in a decade during the first half of the year. Because car demand is often a timely indicator of consumer and business confidence, it can capture economic trends before official data. With the auto sector second only to real estate as having the largest impact on suppliers, according to Banco Bilbao Vizcaya Argentaria SA, weakness in the industry threatens to worsen a downturn in manufacturing. A purchasing manager index for China’s factories slid in July to a five-month low. “Declining car sales are definitely a warning sign for the Chinese economy,” said Paul Gao, McKinsey & Co.’s Shanghai-based head of automotive practice in Asia. “It’s a reflection of consumer confidence.”
  • Bears Pounce on China Solar Makers as Consumption Growth Slows. U.S. investors are keying in on Chinese solar manufacturers as a way to profit from the slowdown in the world’s second-largest economy. Traders have sold short 22 percent of JinkoSolar Holding Co.’s American depositary receipts, the second-most among U.S.-listed Chinese stocks, according to data compiled by Markit and Bloomberg. Trina Solar Ltd. has the third-most bearish bets, amounting to 12 percent of outstanding shares. JA Solar Holdings Co. is fourth at 11 percent.
  • Greek Financial Markets to Open as Talks With Creditors Continue. Greek financial markets reopen on Monday after a five-week suspension as talks continue with creditors on austerity measures and reforms required for a third bailout. Local traders will be able to buy stocks, bonds, derivatives and warrants under certain conditions, according to the Finance Ministry. International investors won’t face any restrictions, as long as they were active in the markets before they were shuttered in June. The resumption of trading comes as Prime Minister Alexis Tsipras negotiates conditions that will be attached to an 86 billion-euro ($94.5 billion) lifeline to see the country through the next three years. An agreement is needed before a payment comes due on bonds held by the European Central Bank on Aug. 20.
  • Commodity Rout Spurs Worst Resource Currency Meltdown in 7 Years. (graph) There’s been no respite in the commodity rout that’s seen prices tumble to a thirteen-year low -- and that’s meant the same for resource currencies. Canada’s dollar sank to its weakest since 2004 as plunging oil prices shrank the economy and prompted Prime Minister Stephen Harper to call an early election. The Australian and New Zealand dollars were within one cent of six-year lows on Monday amid signs of a slowdown in China, the world’s biggest consumer of raw materials. All three currencies have fallen more than 10 percent against their U.S. peer this year.
  • Saudi Stocks Slip Most in 4 Months as Oil Drop Hits Gulf Markets. Saudi Arabia’s stocks fell the most since March, leading declines across equity markets in the six-nation Gulf Cooperation Council, after crude slid to a six-month low. The Tadawul All Share Index slipped 3.2 percent, its biggest retreat since March 25, to 8,807.24 at the close in Riyadh. Saudi Basic Industries Corp. tumbled 4.1 percent to the lowest level in more than three months. The QE Index in Qatar, home to the world’s third-largest natural-gas reserves, dropped 1.1 percent.   
  • China’s Stocks Fall to Three-Week Low on Economic Growth Concern. China’s stocks fell, extending the benchmark index’s biggest monthly loss in six years, as a drop in an official manufacturing gauge re-ignited concern the economic slowdown is deepening. The Shanghai Composite Index slid 2.2 percent to 3,581.17 at 9:42 a.m., the biggest loss since July 8, as technology and energy companies slumped. The CSI 300 Index retreated 1.7 percent on Monday. Hong Kong’s Hang Seng China Enterprises Index fell 2 percent, while the Hang Seng Index lost 1.4 percent.
  • Asian Stocks Fall on China Factory Data as Energy Shares Retreat. Asian stocks fell for the first time in four days as data showed a Chinese factory gauge slipped to a five-month low and energy shares retreated amid a drop in oil. The MSCI Asia-Pacific Index slipped 0.3 percent to 141.67 as of 9:07 a.m. in Tokyo. The measure 
  • Copper Extends Worst Monthly Drop Since January on Chinese Data. “We’re still not seeing demand pick up,” said Jonathan Barratt of Ayers Alliance Securities by phone from Sydney. “A lot of people didn’t anticipate things were going to be as weak as they are. But we’ve had in the back of our minds, if stimulus is working then why is it not helping primary input prices?” Copper fell as much as 0.7 percent to $5,195 a metric ton after slumping 9.3 percent in July and is trading near the lowest level since 2009.
  • Debt Traders Flee Junkyard’s Dogs as Oil Rout Extends Yield Gap. Debt investors are abandoning the bottom rungs of the speculative-grade market as commodity prices at their lowest level in more than a decade pummel borrowers in the energy and mining industries. The yield gap between higher- and lower-rated junk bonds expanded to the widest in more than three years, with the large number of energy and mining companies ranked CCC and lower -- the riskiest bets -- driving the dichotomy, said Martin Fridson, a money manager at Lehmann Livian Fridson Advisors LLC. When removing those companies, the yield on CCC bonds barely changed in July, creating “an industry effect in disguise,” he said. The yield gap between BB-rated bonds -- the top of the junk pile -- and those ranked CCC and lower expanded to 7.91 percentage points, the most since December 2011, according to Bank of America Merrill Lynch index data. The yield premium for energy companies rated junk versus all high-yielders expanded to 3.61 percentage points after touching the highest ever last week. The plight of these high-yield energy companies may next be seen in default rates, which could reach 25 percent in the next year in the B and CCC categories, assuming current commodity prices, according to a UBS Group AG research report Thursday. “Spreads got insanely tight because of that reach for yield a lot of people were going for regardless of ratings,” said Zach Jonson, a money manager at Icon Advisers Inc. in Greenwood Village, Colorado.
Wall Street Journal: 
  • U.S. to Defend New Syria Force From Assad Regime. Military officials play down chances of direct confrontation with the Assad regime. President Barack Obama has authorized using air power to defend a new U.S.-backed fighting force in Syria if it is attacked by Syrian government forces or other groups, raising the risk of the American military coming into direct conflict with the regime of President Bashar al-Assad. 
  • Global Banks May Lose Their Asia Stock-Trading Lift. Lenders got second-quarter revenue boost from Asian boom in trading volumes, but it may be hard to replicate. Global investment banks from Goldman Sachs Group Inc. to Credit Suisse Group AG got a second-quarter revenue boost from Asia when China’s stock market was surging. Now, with Asian stock trading damped by volatility in Chinese shares and declines in some other regional markets, those revenue gains may be hard to replicate.
  • Obama’s New Climate-Change Regulations to Alter, Challenge Industry. The first-ever federal limits on power-plant carbon emissions aim to change the way Americans make and consume electricity and ease climate change. A new rule mandating the first-ever federal limits on power-plant carbon emissions aims to change the way Americans make and consume electricity, accelerating a shift already under way toward cleaner fuels, renewable energy and consumer-generated power.
  • Release the Secret Iran Deals. The Iran Nuclear Agreement Review Act requires that Congress get all the documents, including those involving Iran and any other parties. For those of us who are elected officials, few votes will be more consequential than whether to approve or disapprove the nuclear agreement President Obama has reached with Iran. Yet the president expects Congress to cast this vote without the administration’s fully disclosing the contents of the deal to the American people. This is unacceptable and plainly violates the Iran Nuclear Agreement Review Act—a law the...
  • Iran’s President Says Nuclear Deal Will Help Revive Domestic Economy. Hassan Rouhani says deal will also help ease political tensions in the region. Iran’s landmark nuclear deal will revive a domestic economy that has struggled under a decade of sanctions and help ease political tensions in a volatile region, Iranian President Hassan Rouhani said in a nationally televised speech Sunday. “We must create jobs and seek economic improvement” on the back of the deal...
Fox News:
  • Biden supporters exploring vice president mounting challenge to Clinton. (video) Vice President Joe Biden's associates have resumed discussions about a 2016 presidential run after largely shelving such deliberations while his son was sick and dying earlier this year. But Biden has yet to tell his staff whether he will run or personally ask them to do any planning for a potential campaign, according to several people close to the vice president.
Zero Hedge:
Reuters:
  • China c.bank official sees downward pressure on economy persisting - paper. Downward pressure on China's economy will persist in the second half of the year as growth in infrastructure spending and exports is unlikely to pick up, a senior central bank official was quoted as saying. Chinese companies are not optimistic about business prospects according to the central bank's second-quarter survey, Sheng Songcheng, the director of the statistics division of the People's Bank of China (PBOC), was quoted as saying by the National Business Daily on Saturday. 
  • Automakers buckle up for more China woe after stock crash saps sales. Automakers in China may be forced to come up with more drastic mitigation measures when July sales results released from this week likely reveal a fourth month of contraction after a stock market crash sapped consumer sentiment. Many Chinese who put money in the mainland bull market in the first half of 2015 had to delay big-ticket purchases like cars, analysts said. But a crash from mid-June erased as much as $4 trillion in share value in under a month. What is left of their money is now locked in stocks as many try to avoid losses. Sales in the world's biggest auto market have been hit by declining sentiment as the economy grows at its slowest in 25 years, prompting cost-cutting and discounts. But the crash likely left July sales falling more than June's 2.3 percent, analysts said. "Car manufacturers are biting their nails as they wait to see July sales and the full impact the stock market crash really had," said a Shanghai-based executive at a major U.S. carmaker.
Financial Times:
  • Commodity prices fall hits capital expenditure. A fall in commodity prices is shrinking global corporate spending, with capital expenditure predicted to fall this year and next, research to be published on Monday shows. The energy, chemicals and mining sector accounted for well over a third of global capital expenditure last year but rating agency Standard & Poor’s predicts that spending will fall more than 10 per cent this year and decline further in 2016.
Telegraph:
El Pais:
  • Greece's Varoufakis Says Debt Plan Designed to Fail. Third rescue package is "farce," won't fix problem, former Greek Finance Minister Varoufakis says in interview. Greece going through "fiscal torture," being suffocated by liquidity restrictions, he said.
Commercial Times:
  • Samsung Cuts PC DRAM Output Amid Oversupply. Co. is reducing production of PC DRAMs by at least 30% to help bolster earnings of its memory business.
Caixin:
  • PBOC Official Warns of Local Debt, Banking Risks. Future downward economic pressure "not small," citing Sheng Songcheng, head of PBOC's statistic department. Local govts tended to not report all their debts when audited in June 2013, thus the 2t yuan debt swap plan arranged this year may not cover all debts due, Sheng said. Outstanding bad loans and NPL ratio at banks rose in 1H; banks' profit growth slowed, Sheng said.
Night Trading
  • Asian indices are -1.5% to -.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 111.25 +.5 basis point.
  • Asia Pacific Sovereign CDS Index 63.0 +.5 basis point.
  • S&P 500 futures -.08%.
  • NASDAQ 100 futures -.16%.

Earnings of Note
Company/Estimate 
  • (CDW)/.70
  • (CLX)/1.37
  • (CNA)/.79
  • (DO)/.47
  • (L)/.75
  • (NBL)/.06
  • (TSN)/.92
  • (ALL)/1.02
  • (AIG)/1.23
  • (CAR)/.68
  • (CYH)/.89
  • (CTRP)/.16
  • (MIC)/.30
  • (MCHP)/.71
  • (PPS)/.72
  • (THC)/.45
  • (VNO)/1.23
Economic Releases
8:30 am EST
  • Personal Income for June is estimated to rise +.3% versus a +.5% gain in May.
  • Personal Spending for June is estimated to rise +.2% versus a +.9% gain in May.
  • The PCE Core for June is estimated to rise +.1% versus a +.1% gain in May.
9:45 am EST
  • Final Markit US Manufacturing PMI for July is estimated at 53.8 versus 53.8 in June.
10:00 am EST
  • Construction Spending for June is estimated to rise +.6% versus a +.8% gain in May.
  • ISM Manufacturing for July is estimated at 53.5 versus 53.5 in May.
  • ISM Prices Paid for July is estimated to fall to 49.3 versus 49.5 in May.
Afternoon
  • Total Vehicle Sales for July are estimated to rise to 17.2M versus 17.11M in June.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The Eurozone Manufacturing PMI, Australia Trade Balance and the EU decision on (FDX)/TNT Express deal could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and industrial shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finished modestly lower. The Portfolio is 25% net long heading into the week.

Weekly Outlook

Week Ahead by Bloomberg. 
Wall St. Week Ahead by Reuters.
Stocks to Watch Monday by MarketWatch.
Weekly Economic Calendar by Briefing.com.

BOTTOM LINE: I expect US stocks to finish the week modestly lower on
Fed rate hike worries, earnings outlook concerns, China bubble-bursting fears, commodity weakness, European/Emerging Markets/US High-Yield debt angst and technical selling. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 25% net long heading into the week.

Today's Headlines

Bloomberg: 
  • Hillary and Bill Clinton Made $139 Million in Eight Years. Hillary and Bill Clinton made $139.1 million over the past eight years, cashing in on their celebrity and connections to put themselves in the ranks of the highest-paid Americans, according to tax returns released Friday by the former secretary of state's presidential campaign. Speaking fees paid to both Clintons. along with former President Bill Clinton's lucrative consulting deals put the couple near the very, very top of the U.S. economic scale. Their 2012 adjusted gross income of $19.7 million placed them in the top 0.01 percent for that year, a level reached by fewer than 14,000 households, and it represents a meteoric rise for a couple that once depended on Hillary Clinton's law firm salary. She was the prime family breadwinner when Bill Clinton was making $35,000 a year as governor of Arkansas. Now, they have his-and-hers limited liability companies, and their annual property tax bill is about double the U.S. median income.  
  • Joe Biden Not Ruling Out A Challenge To Hillary Clinton. U.S. Vice President Joe Biden is continuing to assess whether to run against Hillary Clinton for the Democratic presidential nomination, and will probably make a decision next month, according to a person with knowledge of his thinking.
  • Puerto Rico Official Says Island Will Default on Agency Debt. Puerto Rico said it won’t make a bond payment due Saturday, putting the commonwealth on a path to default and promising to initiate a clash with creditors as it seeks to renegotiate its $72 billion of debt. The government doesn’t have the money for the $58 million of principal and interest due on Public Finance Corp. bonds, Victor Suarez, the chief of staff for Governor Alejandro Garcia Padilla said during a press conference Friday in San Juan. “We cannot make the payment tomorrow because we do not have the funds available,” Suarez told reporters. “This payment will be made as we address how to restructure the government’s debt prospectively.”
  • Hedge Funds Boost Bullish Treasury Futures Bets to Two-Year High. Plunge in oil prices lower inflation outlook. As oil prices tanked, hedge-fund managers and other large speculators increased bullish bets on Treasury securities to the most in two years, even as the Federal Reserve moves closer to raising interest rates. Speculative positions, or bets prices will rise, outnumbered short positions by 65,642 contracts as of July 28, according to data from the Commodity Futures Trading Commission released Friday. The figure was the most net-long positions since April 2013. Last week, traders were net-long 27,400 contracts, reversing a short position they held since September.
  • Hospital Drug Pump Can Be Hacked Through Network, FDA Warns. A pump used to infuse drugs at a patient’s bedside can be hacked through hospital networks, causing an over- or under-dose, U.S. regulators said. Health-care providers should stop use of the pumps, which were manufactured by Hospira Inc. and called Symbiq, the Food and Drug Administration said in a statement Friday. While Hospira has quit making the devices, they are still in use by hospitals, nursing homes and other health-care facilities to administer drugs intravenously, according to the agency. The FDA “strongly encourages health-care facilities to begin transitioning to alternative infusion systems as soon as possible,” the agency said. The FDA warned about similar vulnerabilities to other Hospira pumps in May.
  • Koch Calls for End to "Corporate Welfare" for Wall Street. Charles Koch, the billionaire leader of a conservative network that has pledged to spend hundreds of millions of dollars influencing next year's elections, called for an end to what he called "corporate welfare" for the biggest U.S. banks. Big banks, Koch said, "are among the greatest proponents of corporate welfare," having received bailouts during the financial crisis and access to unlimited lending from the Federal Reserve. Meanwhile, the burden of financial regulations imposed in the crisis's wake fell hardest on small, community banks, many of which were forced out of business, he added. Big banks' political contributions help preserve their advantages, he said. "The destructive cycle goes on and on," he said. While Koch's remarks are consistent with the small-government mantra he has espoused for decades, they serve as a reminder of the threat the country's biggest banks face from the right as well as the left.
  • Einhorn’s Greenlight Fund Slumps 6.1% in July Amid Gold Rout. Greenlight Capital, the hedge-fund firm led by David Einhorn, fell 6.1 percent in July as the Greek debt crisis, volatile stock markets in China, and plunging prices of gold and oil rocked markets. The decline brought losses in Greenlight’s main fund to 9 percent in 2015, according to an e-mail sent to clients that was obtained by Bloomberg News.

Wall Street Journal:
  • Uber Valued at More Than $50 Billion. Ride-sharing app, which just closed a funding round, reaches mark faster than Facebook. Uber Technologies Inc. has completed a new round of funding that values the five-year-old ride-hailing company at close to $51 billion, according to people familiar with the matter, equaling Facebook Inc.’s record for a private, venture-backed startup.
CNBC: 
  • The "Calamitous Club" has a new member: Brazil. Earlier this week, Deutsche Bank put out an analysis of the most woeful countries. In particular, the write up contained a smart little paragraph on a global powerhouse that used to be a darling of the global economy:
Zero Hedge:
CBS:
  • Homeland Security Said to Warn About Drone Attacks. Unmanned aircraft systems, or drones, could be used in U.S. for criminal, terrorist activities, citing intelligence assessment sent yesterday to police agencies.
BBC:
  • Saudi Arabia Condoles Bin Laden Family on U.K. Plane Crash. Private jet believed to have links to family of Osama Bin Laden crashed in U.K. Friday as it attempted to land. Saudi Embassy in London issued statement offering condolences to Bin Laden family. Saudi ambassador expressed sympathy for family in post on Twitter.
Spiegel:
  • Merkel to Seek Re-Election as German Chancellor. Angela Markel discussed in internal strategy meeting who could be in charge of election campaign in 2017, without saying where it got the information.
ISIS has built near-impregnable base and mass appeal: New book - See more at: http://www.straitstimes.com/news/world/europe/story/isis-has-built-near-impregnable-base-and-mass-appeal-new-book-20150205#sthash.TSyXsl7s.dpuf
ISIS has built near-impregnable base and mass appeal: New book - See more at: http://www.straitstimes.com/news/world/europe/story/isis-has-built-near-impregnable-base-and-mass-appeal-new-book-20150205#sthash.TSyXsl7s.dpuf
Nikkei:
  • China Suspends Trading at Citadel Unit Brokerage Account. China has suspended trading at 24 brokerage accounts, including that of a subsidiary of Citadel. Suspension of trading part of effort to stabilize stock prices. Stock exchanges of Shanghai, Shenzhen announced the 3-month suspension yesterday. The bourses apparently blame short-term trading by the 24 accounts for wild share price swings.
Securities Times:
  • China's PPI May Continue to Drop Amid Destocking. China's producer prices may continue to drop as destocking hasn't ended yet, citing Pan Jiancheng, vice director at China Economic Monitoring and Analysis Center of the National Bureau of Statistics. Survey showed that entrepreneurs don't see signs of easing in overcapacity and some consider that overcapacity issue will become more severe, Pan said.