Monday, February 01, 2016

Tuesday Watch

Posted by Gary .....at 10:58 PM
Evening Headlines
Bloomberg:
  • Cruz Upsets Trump in Iowa Republican Vote; Clinton Holds Lead. Senator Ted Cruz of Texas won the Iowa Republican caucuses in an upset over billionaire Donald Trump, while Democrat Hillary Clinton was clinging to a narrow edge over Senator Bernie Sanders of Vermont. Senator Marco Rubio was doing better than expected and might be afforded an opportunity to make a case for establishment Republicans to coalesce around him. With 85 percent of precincts counted in the Republican contest, Cruz led Trump 28 percent to 24 percent. Rubio surged into third with 23 percent. Retired surgeon Ben Carson was fourth with 9 percent. None of the other eight Republicans, including former Florida Jeb Bush and Ohio Governor John Kasich was drawing more than 5 percent. In the Democratic race Clinton had 50 percent support to 49 percent for Sanders with more than three-quarters of precincts reporting. The third Democrat in the race, former Maryland Governor Martin O’Malley was set to announce a suspension of his campaign.
  • The Global Consequences of China's Manufacturing Slowdown. (video)
  • Hong Kong Retailers Face Weak Chinese New Year Sales Season. Hong Kong retailers looking for a fortuitous start to the Chinese New Year should expect to be disappointed as a weaker yuan, stock market volatility and a drop in same-day visitors from the mainland put further pressure on a sector already suffering after months of sliding sales. Reports from the retail and catering sectors suggest same-day visitors to Hong Kong so far this year are “a bit weaker” than last year, according to Anthony Lau, executive director of the Hong Kong Tourism Board. The group said last week that the number of monthly visitors in December was down 11 percent year-on-year, and the number of tourists from mainland China fell 16 percent over the same time frame. The total number of annual visitors to Hong Kong fell 2.5 percent last year to 59.3 million.
  • Hong Kong Property Slump Worries Investors. In a city that saw demand propel property prices to a record last year, the estimate that transactions reached a 25 year-low in Hong Kong shows how quickly sentiment has turned. Home prices have slumped almost 10 percent since September and monthly sales in January fell to the lowest since at least 1991, according to Centaline Property Agency Ltd. Amid a spike in flexible mortgage rates this month and anemic demand for new developments, the low transactions volume for January is the latest evidence that prices have further to fall. "The danger is that when sentiment turns negative, it’s very hard to turn things around," Michael Spencer, Deutsche Bank AG’s Hong Kong-based Asian chief economist, said in a telephone interview. "Developers realize they missed the best opportunity to sell."
  • Japan Trading Houses Facing $13 Billion Hit on Commodity Misfire. A handful of companies that have dominated almost every kind of raw-material business in Japan for decades may take as much as $13 billion in charges during the current fiscal year. The global commodity slump is squeezing the “sogo shosha,” or general trading houses like Mitsubishi Corp. that supply everything from gasoline and steel to seafood and noodles in resource-poor Japan. They invested in metals and energy only to see prices fall. Already, Sumitomo Corp. has taken a $650 million writedown at a nickel project in Madagascar. Its rivals will probably report impairments as soon as this week, says Goldman Sachs Group Inc. 
  • Ringgit Slides With Stocks as 1MDB Woes Come Back Into Focus. The ringgit led declines in Asia and stocks fell as state-investment company 1Malaysia Development Bhd. came back to haunt the currency just as a pickup in oil was stoking a recovery. A week after Prime Minister Najib Razak, who chairs the company’s advisory board, was cleared in a probe over any wrong doing related to a political donation, the Swiss Attorney General announced it’s pursuing an investigation into alleged diversion of funds from 1MDB. Singapore has also seized bank accounts related to possible money laundering associated with the firm, which was in the limelight last year due to concern about its rising debt. The ringgit weakened 0.7 percent to 4.1845 a dollar as of 9:56 a.m. in Kuala Lumpur, after last week posting its biggest rally since October as the outlook for the oil-exporting nation’s finances improved amid a recovery in Brent crude.
  • Asian Shares Slip With U.S. Futures as Oil Selloff Dogs Markets. Asian stocks and U.S. index futures retreated as oil extended its decline, with commodity producers from Sydney to Tokyo slipping amid lingering anxiety over the world economy. Asia-Pacific equities snapped a four-day advance amid fading optimism sparked by last week’s Bank of Japan stimulus move. Japanese shares fell from their highest level in almost a month and energy companies drove declines in Australia as U.S. crude extended last session’s 6 percent selloff, dropping back toward $31 a barrel. Malaysia’s ringgit led a retreat in high-yielding currencies while the yen rose. The MSCI Asia Pacific Index fell 0.3 percent as of 10:57 a.m. Tokyo time, with groups of mining stocks and oil and gas producers sliding at least 0.8 percent.
  • Think Crude's Cheap? Biodiesel's Going for Free in Some Places. Biodiesel’s become so cheap in the U.S. that some refiners are being paid to use it. Midwest refiners are paying as little as 64.5 cents a gallon for the fuel after factoring in a $1-a-gallon tax subsidy and other credits. Add further incentives offered by California into the mix and some customers are effectively getting biodiesel for free in the Golden State.
  • Fidelity Writes Down Snapchat Holding by 63 Percent. Snapchat Inc.’s valuation was cut by 63 percent in December by one of its largest investors. This was Fidelity Investments’ second writedown of the photo-sharing app maker in three months. Mutual funds have recently marked down the values of their stakes in several private technology companies, including Dropbox Inc. and Zenefits. The moves are another jolt of sobriety for Silicon Valley startups as they face a tighter fundraising environment. The Fidelity Blue Chip Growth Fund, one of the funds that holds Snapchat, reported the value of its Snapchat shares at $6.37 million as of Dec. 31, according to a public filing. The same holding had been valued at $17.4 million on Nov. 30.
Wall Street Journal:
  • Ted Cruz Beats Donald Trump in Iowa’s GOP Race. Marco Rubio posts a strong showing in third place. Texas Sen. Ted Cruz outmuscled businessman Donald Trump to win the first-in-the-nation Iowa caucuses on Monday, cementing his status as the leading alternative to the Republican front-runner. With 99% of the precincts reporting, Mr. Cruz led the GOP field as the top pick of 28% of Republican caucus-goers, followed by Mr. Trump at 24% and Florida Sen. Marco Rubio at 23%. The Texas senator also was projected the...
  • Hillary Clinton and Bernie Sanders Dig in for Long Battle Beyond Iowa Caucus. Clinton campaign says it’s well positioned; Sanders vows to press on. Hillary Clinton had hoped to wrap up her party’s nomination early, and for months that seemed plausible given her vigorous fundraising, stack of endorsements and robust ground organization.
  • Gilead(GILD) and Biden’s Cancer Campaign. You can’t make medical progress by punishing medical advances. Joe Biden is leading a White House “moonshot” to cure cancer by 2020, and good for him. Along the way maybe he can warn his fellow politicians to stop undermining medical advances with price controls.
Barron's: 
Fox News:
MarketWatch:
Zero Hedge:
Business Insider:
Politico:
  • Marco Rubio to score big endorsement from Tim Scott. Marco Rubio is expected to secure the widely coveted endorsement of South Carolina Sen. Tim Scott on Tuesday, according to three sources. Scott, the only black Republican is the U.S. Senate, will be Rubio’s second major congressional endorsement in the state; the Florida senator has also secured the backing of South Carolina Rep. Trey Gowdy. Rubio is expected to make a major play in South Carolina’s Feb. 20 primary.
PredictIt:
Telegraph: 
Bild:
  • Varoufakis Says Greek Debt Repayments Will Be Difficult. Former Greek Finance Minister Yanis Varoufakis says in guest column in Bild that Greece's economy was severely injured and it's unlikely Greece can pay back its debts. Repayment to Germany will be hard, especially since Greece lost a third of govt revenue and gross domestic product and banks can't yet even grant credits to a profitable co.
Night Trading 
  • Asian equity indices are -.50% to +.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 151.25 -.75 basis point.
  • Asia Pacific Sovereign CDS Index 78.5 +1.75 basis points.
  • Bloomberg Emerging Markets Currency Index 67.93 -.15%.
  • S&P 500 futures -.38%.
  • NASDAQ 100 futures -.38%.

Earnings of Note 
Company/Estimate
  • (ADT)/.46
  • (AGCO)/.79
  • (ADM)/.66
  • (BAX)/.32
  • (BP)/.04
  • (DOW)/.70
  • (EMR)/.51
  • (XOM)/.64
  • (LYB)/2.15
  • (KORS)/1.46
  • (PFE)/.52
  • (PBI)/.53
  • (RCL)/.92
  • (R)/1.75
  • (SMG)/-1.13
  • (UPS)/1.42
  • (CHRW)/.87
  • (CMG)/1.86
  • (GILD)/2.97
  • (ILMN)/.82
  • (IAC)/.92
  • (MANH)/.35
  • (RHI)/.70
  • (TDW)/-.31
  • (YHOO)/.13
Economic Releases
9:45 am EST
  • The ISM New York for January.
10:00 am EST
  • The IBD/TIPP Economic Optimism Index for February is estimated to rise to 47.6 versus 47.3 in January.
Afternoon:
  • Total Vehicle Sales for January are estimated to rise to 17.3M versus 17.22M in December.
Upcoming Splits
  • (AFSI) 2-for-1
  • (FRO) 1-for-5
Other Potential Market Movers
  • The Iowa Caucus results, Fed's George speaking, Eurozone PPI, China Services PMI, BoJ Minutes, weekly US retail sales reports and the (F) January sales call could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by industrial and commodity 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.
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Stocks Reversing Slightly Higher into Final Hour on Central Bank Hopes, Short-Covering, Technical Buying, Transport/Tech Sector Strength

Posted by Gary .....at 3:31 PM
Broad Equity Market Tone:
  • Advance/Decline Line: Slightly Lower
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 20.35 +.74%
  • Euro/Yen Carry Return Index 137.89 +.58%
  • Emerging Markets Currency Volatility(VXY) 12.12 +.50%
  • S&P 500 Implied Correlation 60.98 +2.03%
  • ISE Sentiment Index 90.0 -11.76%
  • Total Put/Call 1.06 +17.78%
  • NYSE Arms 1.13 +61.70% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 103.59 +1.68%
  • America Energy Sector High-Yield CDS Index 1,921.0 +1.08%
  • European Financial Sector CDS Index 93.50 +1.91%
  • Western Europe Sovereign Debt CDS Index 22.13 +3.82%
  • Asia Pacific Sovereign Debt CDS Index 78.49 +2.17%
  • Emerging Market CDS Index 369.96 +.27%
  • iBoxx Offshore RMB China Corporate High Yield Index 122.36 -.05%
  • 2-Year Swap Spread 6.5 -.25 basis point
  • TED Spread 30.25 +.5 basis point
  • 3-Month EUR/USD Cross-Currency Basis Swap -21.25 +1.25 basis points
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 68.15 unch.
  • 3-Month T-Bill Yield .30% -1.0 basis points
  • Yield Curve 115.0 unch.
  • China Import Iron Ore Spot $43.02/Metric Tonne +3.12%
  • Citi US Economic Surprise Index -50.5 -3.4 points
  • Citi Eurozone Economic Surprise Index -22.20 +2.9 points
  • Citi Emerging Markets Economic Surprise Index -7.3 -3.5 points
  • 10-Year TIPS Spread 1.41% -1.0 basis point
  • 22.9% chance of Fed rate hike at April 27 meeting, 36.8% chance at June 15 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating -60 open in Japan 
  • China A50 Futures: Indicating -177 open in China
  • DAX Futures: Indicating -3 open in Germany
Portfolio: 
  • Higher: On gains in retail/tech/biotech/medical sector longs and my emerging markets shorts
  • Disclosed Trades: None
  • Market Exposure: 50% Net Long
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Today's Headlines

Posted by Gary .....at 3:01 PM
Bloomberg:
  • China's Stocks Extend Worst Rout Since 2008 on Growth Concerns. (video) Chinese stocks extended the steepest monthly selloff since the global financial crisis after an official factory gauge slumped to a three-year low, some of the nation’s largest companies warned of disappointing earnings and traders unwound margin debt. The Shanghai Composite Index slid 1.8 percent to 2,688.85 at the close, extending its loss this year to 24 percent. PetroChina Co., which has the biggest weighting on the benchmark gauge, dropped after saying annual net income probably fell as much as 70 percent. China Life Insurance Co. declined to a 14-month low after reporting earnings for last year that trailed forecasts. Leveraged bets on Chinese stock exchanges fell for a record 21st day on Friday to the lowest level since the depths of the last year’s rout.
  • OECD's Gurria: China's Economy to Be Turbulent for Years. (video)
  • Emerging Market ETF Losses Top $4B in January, Most in 5 Months. Investors withdrew $272 million from U.S. exchange traded funds that buy emerging markets stocks and bonds last week, bringing January’s losses to more than $4 billion, the most since August. Redemptions from emerging-market ETFs that invest across developing nations as well as those that target specific countries totaled $4.13 billion, compared with inflows of $1.36 billion in December, according to data compiled by Bloomberg. Last month’s declines were the worst since August, when they reached $6.13 billion.
  • China Construction Bank Fund Price Falls After `Massive' Outflow. The price of a mutual fund managed by a unit of China Construction Bank Corp. fell by more than two-thirds in one day as investors rushed for the exit. The unit price of the Jianxin Xinfeng C fund fell to 0.337 yuan Friday from 1.039 yuan on Thursday because of a "massive redemption," its manager, CCB Principal Asset Management, said in a statement Monday. Those who redeemed were paid a per-unit rate rounded to the third digit after the decimal point and above fair value, leaving the remaining investors with a loss, CCB Principal said in the filing to Cninfo.com.cn, the website designated for disclosures by the China Securities Regulatory Commission.
  • Canadian Bonds Lurch to Worst January Since 2009 in Energy Rout. A global financial rout that wiped US$7 trillion from equities markets worldwide and sent oil plunging to a 12-year low in January didn’t spare Canada’s bond market. An index of Canadian investment grade, high-yield and government debt issued in U.S. dollars is on track for its worst performance in the first month of the year since 2009, according to Bank of America Merrill Lynch indexes.
  • World's Worst Currency Sparking Outflows From Mexico's Stock ETF. Traders are pulling money from Mexico’s biggest exchange-traded stock fund at the fastest pace in seven months, tracking the tumble in the nation’s currency. The iShares MSCI Mexico Capped ETF has posted $118.9 million in outflows so far in 2016, the most among similar funds from major emerging markets after Taiwan, according to data compiled by Bloomberg. While the Latin American nation’s benchmark IPC equity gauge has climbed 1.5 percent in the span, it’s slumped 4.8 percent when measured in dollars. The peso has slid 6.3 percent this year, the most among major currencies.
  • Emerging-Asset Rally Ends as China Growth Concern Resurfaces. The MSCI Emerging Markets Index declined 0.1 percent to 741.63 at 11:42 a.m. in New York. While the gauge jumped last week, it retreated 6.5 percent in January. A measure tracking 20 developing-nation currencies depreciated 0.1 percent on Monday after falling 1.5 percent last month.
  • Europe Shares Drop as Disappointing China, U.S. Data Damp Mood. (video) European stocks retreated as deteriorating Chinese and U.S. data dented the investor optimism that helped trim January losses last week. The Stoxx Europe 600 Index slid 0.2 percent to 341.61 at the close, paring earlier declines of as much as 1.2 percent in late trading.
  • S&P Lowers Shell's Rating, Puts Other Oil Majors on Watch. Standard & Poor’s lowered its rating on Royal Dutch Shell Plc and sees a significant likelihood of downgrades for several Europe-based integrated oil and gas majors in the next weeks. "We lowered our ratings on Royal Dutch Shell Plc to ’A+/A-1’ from ’AA-/A-1+’ and placed the long-term rating on CreditWatch with negative implications," S&P said in an e-mailed statement. "We also placed on CreditWatch negative our ratings on BP Plc, Eni SpA, Repsol S.A., Statoil ASA, Statoil Forsikring AS, Statoil US Holdings Inc., and Total S.A."
  • Traders Seeking High-Quality Stocks Is Bearish Market Signal. In the worst start for the U.S. stock market since 2009, investors have been aggressively loading up on shares of companies with the sturdiest earnings momentum. And that’s raising concerns. Animal spirits are out as qualities that define winning investments no longer include the high-risk, high-reward potential of shares backed by debt-laden balance sheets. History shows that such a shift has been a bearish signal for stocks in the past, often marking the end of bull markets.
  • Iowa Senator Ernst Questions Trump’s Conservative Credentials. “Judging from what he said just a few years ago, I would not have agreed that he was a conservative." The prospect of Trump winning has unnerved some Republican leaders. Ads opposing him on air in Iowa highlight the billionaire businessman’s previous statements on abortion and guns, in which he sounds more like a Democrat.
Wall Street Journal:
  • Gulf States Shy Away From OPEC Meeting to Cut Production. Delegates say they want to wait to see the effect of Iran’s return to market. Persian Gulf Arab oil producers don’t support holding an emergency meeting of the Organization of the Petroleum Exporting Countries, officials said, dampening expectations that the group will act to prop up sagging crude prices. Persian Gulf Arab OPEC delegates said they want to wait until the next scheduled OPEC meeting in June, when they will have a clearer picture of how new barrels of Iranian oil are affecting the market now that Western sanctions have ended. Iran has pledged to increase production by a million...
Fox News: 
  • Official: Withheld Clinton emails contain 'operational' intel, put lives at risk. (video) EXCLUSIVE: Highly classified Hillary Clinton emails that the intelligence community and State Department recently deemed too damaging to national security to release contain “operational intelligence” – and their presence on the unsecure, personal email system jeopardized “sources, methods and lives,” a U.S. government official who has reviewed the documents told Fox News.
Zero Hedge:
Business Insider:
RedState: 
  • Every Day Trump Brings me Closer to Casting a Vote for Hillary. Incidents like last night’s infantile howling over Ben Sasse’s criticism push me strongly towards not only not voting for Trump, but actually voting for his opposition, whoever it might be. Ben Sasse is without a doubt a good conservative. If Trump acts like a Republican front runner, and stays [at least allegedly] pro-life, and campaigns for other Republicans and just in general cleans up his act, I will vote for him. If he continues being a moronic oaf and/or backtracks on his promise that he’s pro-life, I’ll probably just stay home. If he keeps attacking and insulting other Republicans, I’ll vote Hillary and be glad about doing it. Of course, there’s a pretty good chance that’s the entire point of the Donald Trump 2016 campaign.
Washington Times: 
  • Obama misled Congress on debt limit: House report. Debt fight won’t lead to default, could embolden conservatives. The government could have continued to pay Social Security and other critical payments in the event it reached its debt limit, but the Obama administration intentionally misled Congress about that to force Republicans to hike the borrowing ceiling, a House panel said Monday, citing internal Treasury Department documents. The stunning revelation could fundamentally change the battleground between Capitol Hill and the White House heading into the next debt showdown early next year, because it means a president could no longer use the threat of a full government shutdown to win a debt hike.
PredictIt:
Reuters:
Telegraph:
Handelsblatt:
  • Citigroup Economist Expects 2.5% Growth in China in 2016. Citigroup's Chief Economist Willem Buiter expects growth in China to slow more drastically than many think and will come close to a recession, citing interview. Though official data show China growth at 6.9% last year, Buiter says was closer to 4%. Further drop would result in rising unemployment, bankruptcies, and need by Chinese govt to bail out banks and borrowers. Slowdown will hit exporting nations Germany, South Korea and Japan.
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Bear Radar

Posted by Gary .....at 1:29 PM
Style Underperformer:
  • Small-Cap Value -1.1%
Sector Underperformers:
  • 1) Oil Service -3.8% 2) Energy -3.1% 3) Banks -1.5%
Stocks Falling on Unusual Volume:
  • ROP, NEOS, HUBB, PFPT, DM, D, NTCT, SOHU, HAR, SLG, DWA, WUBA, AFL, AGU, GTT, RPM, GFF, AEL, KMX, GIMO, AME, CS, CYOU, APEI, OII, AXLL, QLGC, EEFT, JOE, AEL, DWA and ROP
Stocks With Unusual Put Option Activity:
  • 1) BRK/B 2) GE 3) AET 4) FL 5) UPS
Stocks With Most Negative News Mentions:
  • 1) VALE 2) GPRO 3) RH 4) PBR 5) BK
Charts:
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Bull Radar

Posted by Gary .....at 1:08 PM
Style Outperformer: 
  • Mid-Cap Growth -.2% 
Sector Outperformers:
  • 1) Gold & Silver +1.6% 2) Computer Hardware +1.0% 3) Utilities +.9% 
Stocks Rising on Unusual Volume: 
  • ALR, AYA, STR, SYY, QSII, TWTR and SMCI
Stocks With Unusual Call Option Activity: 
  • 1) LL 2) HLT 3) LC 4) KR 5) SYY
Stocks With Most Positive News Mentions: 
  • 1) APD 2) NOC 3) CNH 4) MNST 5) TWTR
Charts:
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Morning Market Internals

Posted by Gary .....at 11:01 AM
NYSE Composite Index:
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