Tuesday, February 02, 2016

Wednesday Watch

Posted by Gary .....at 10:49 PM
Evening Headlines
Bloomberg:
  • Chinese Stocks Extend Monthly Rout as Energy Producers Decline. Chinese stocks dropped, extending last month’s rout, as traders unwound bullish bets and plunging oil prices weighed on energy producers. The Shanghai Composite Index fell 1.2 percent to 2,717.03 at 10:33 a.m., extending its slide this year to 23 percent. PetroChina Co. slid to a one week-low, leading energy companies lower. Developers eked out gains after the central bank lowered mortgage down payments for first-home buyers. The Hang Seng China Enterprises Index tumbled 3 percent, heading for its lowest close since March 2009.
  • China survey shows consumers pessimistic for first time. China's eternally optimistic consumers have turned pessimistic, joining bankers and entrepreneurs. An index of "future income confidence" based on a quarterly survey of consumers by the central bank fell below the mid-point of 50 for the first time ever in December. A separate sentiment gauge for entrepreneurs by the the People's Bank of China fell into pessimistic territory for the first time since 2009, and now is at a record low, while a survey of bankers shows they've been getting more pessimistic for five straight quarters. 
  • Yuan Options Most Bearish in Asia as Traders Ready to Fight PBOC. (video) Traders are paying more to bet on a yuan decline with options than they do for any other Asian currency, suggesting bears are regrouping after being thwarted by the central bank last month. The extra cost for three-month options to sell the yuan against the dollar in the Hong Kong market over contracts to buy jumped in January by the most since 2011, approaching the record seen after its Aug. 11 devaluation. The value of contracts carrying the right to sell the yuan at or beyond 7 per dollar -- 5.5 percent weaker than the current spot rate -- surged more than 50 percent last month.
  • Aussie Woes as China Slows Seen in Record Trade Deficit: Chart. As China switches gears away from heavy investment and toward consumption, the reverberations are being felt Down Under. Prices for Australia’s biggest export, iron ore, have slumped and the country’s trade position has steadily deteriorated, culminating in a record A$32.7 billion ($22.9 billion) deficit in 2015, according to data dating back to 1971.
  • Hong Kong Property Stock Gloom Seen Deepening in Options Market. (graph) As Hong Kong property prices slump with real estate stocks, investors are looking to the options market for protection. Traders paid the most in four years in January to hedge against losses on Sun Hung Kai Properties Ltd. versus the cost of bullish bets, according to data compiled by Bloomberg. A similar pattern emerged in options on Wharf Holdings Ltd. A measure of the city’s property stocks is down 33 percent in the past year, with losses accelerating in January as the Hong Kong dollar weakened and real-estate sales fell to the lowest in at least 25 years. “Pressure on share prices in the sector will persist," said Alfred Lau, analyst at Bocom International Holdings Co. “Investors’ concern is deepening on faster-than-expected Hong Kong capital outflow."
  • Hong Kong's Last Property Slump Saw Prices Fall by 70%: Chart.
  • Won Declines to Two-Week Low With Stocks as Bonds Extend Rally. South Korea’swon fell to a two-week low and stocks joined a rout in Asian equities as an overnight drop in oil prices deterred risk-taking. Downside risks for South Korea’s exports may increase as China’s economy and oil prices are unlikely to recover in the short term, Trade Minister Joo Hyung Hwan said in a statement Wednesday. Crude retreated below $30 a barrel in New York and is down about 20 percent this year as increasing U.S. stockpiles exacerbate a global glut. Sovereign bonds rallied, pushing the yields to fresh lows, as investors sought the relative safety of government debt. North Korea said it will launch a long-range rocket between Feb. 8 and Feb. 25 to put a satellite in orbit, following its fourth nuclear test on Jan. 6. The won dropped 0.5 percent to 1,212.80 a dollar as of 10:12 a.m. in Seoul, data compiled by Bloomberg show.
  • Yen Loses Half Post-BOJ Slide as Japan Yield Drops to G-7 Record. Negative Japanese policy rates have pushed the yield on the nation’s benchmark bond to the lowest among Group-of-Seven economies, but it’s not working its magic on the yen or domestic stocks, which are reversing course as a renewed selloff in crude oil makes investors risk-averse.
  • Stock Rout Deepens in Asia as Oil Slumps Below $30; Yen Climbs. Asian stocks tumbled for a second day as Nomura Holdings Inc. reported disappointing earnings and oil’s slump below $30 a barrel eroded investor confidence in global economic growth. Demand for the safest assets boosted the yen and government bonds.Japan’s Topix index sank the most in two weeks as Nomura plunged 12 percent, the biggest decline since 2011. The MSCI Asia Pacific Index retreated 2.3 percent as of 10:36 a.m. Hong Kong time, with more than 17 stocks falling for each one that rose. Nomura, which reported a 49 percent drop in third-quarter profit, was among the biggest drags on the regional index and helped send the Topix to a 3.3 percent slump. The Hang Seng China Enterprises Index of mainland companies in Hong Kong sank 3 percent, despite a move by the central bank late Tuesday to prop up the Chinese real estate sector.
  • Oil Extends Slide Below $30 as U.S. Supplies Seen Expanding Glut. Oil extended its decline below $30 a barrel after the biggest two-day drop in almost seven years as U.S. industry data showed crude stockpiles increased, exacerbating a global surplus. Futures decreased as much as 0.7 percent in New York after falling 11 percent the previous two sessions, the most since March 2009. Inventories expanded by 3.8 million barrels last week, the American Petroleum Institute was said to report Tuesday. A government report Wednesday is forecast to show supplies climbed by 4 million barrels, according to a Bloomberg survey. Exxon Mobil Corp. is cutting its drilling budget to a 10-year low amid the price slump.
  • Oil Industry's Plan to Keep Investors Happy: Borrow More Money. The world’s largest oil companies have a plan to weather the worst market in over a decade: borrow more money. Major oil companies faced with the lowest crude prices since 2003, capital spending budgets with little left to cut and strong commitments to their dividends will have to take on billions in debt this year as they await a market rebound. Take BP Plc, whose net debt rose by almost $5 billion in 2015. After reporting a record annual loss on Tuesday, Chief Executive Officer Bob Dudley said he would borrow billions more if it was needed to sustain investor dividends.
  • If You're Wondering How Low U.S. Gas Can Go, Check the Rig Count. (graph) U.S. natural gas just fell below $2 per million British thermal units for the third time in three months and futures are at the lowest level for this time of year since 1999. For an idea of how long this rout will last, consider the 121 rigs left drilling for the fuel in the U.S. That’s the lowest count since 1987, down from a peak of 1,606. And yet, the U.S. government’s latest monthly data show production continues to rise.
  • Exxon(XOM) Faces First Downgrade Since Depression as Oil Rout Worsens. Exxon Mobil Corp., one of three U.S. companies with Standard & Poor’s highest rating, is facing its first downgrade in 86 years as the worst crude-market collapse in a generation strangles oil producers of cash. For Exxon, that would be a historic event: the global explorer that traces its roots to the 19th century and John D. Rockefeller’s Standard Oil Trust has been rated AAA by S&P since 1930. The oil giant was placed on credit watch with negative implications because its credit measures probably will remain weak through 2018, S&P said Tuesday. “We get value from our AAA credit rating in our business,” Exxon’s Vice President of Investor Relations Jeffrey Woodbury said during a conference call with analysts before the credit review was announced. “Whether it be access to financial markets or access to resources, there is a benefit that we get from it, and we see it as being important.” The world’s five largest oil explorers had their credit ratings cut or threatened with downgrade as the market crash undermines their ability to pay debts, dividends and rig leases. For most of the oil industry, slashing drilling budgets and other cost-cutting “are insufficient to stem the meaningful deterioration expected in credit measures over the next few years,” S&P said. 
  • Credit Market Fear Gauge Jumps as Oil Plunge Renews Global Rout. Credit markets were ensnared in the global equities selloff Tuesday, with measures of corporate default risk in the U.S. jumping to a two-week high. The risk premium on the Markit CDX North American High Yield Index, a credit-default swaps benchmark tied to the debt of 100 speculative-grade companies, jumped 26 basis points to 536 basis points at 4:32 p.m. in New York. A similar index for investment-grade debt jumped 4.6 basis points to 108.652, also a two-week high. Yields on benchmark 10-year Treasuries dropped to the lowest in almost 10 months Tuesday, as declines in stocks and oil again darkened outlook for global growth. Amid the worst commodities rout in a generation, Standard & Poor’s downgraded some of the biggest U.S. explorers, including Chevron Corp., Hess Corp., Continental Resources Inc. and Devon Energy Corp. “Growth concerns are still wreaking havoc, fundamentals have deteriorated, default rates are increasing and there is a huge influx of fallen angels which has everyone running for the hills,” said Michael Collins, a portfolio manager at Prudential Investment Management Inc. 
  • Goldman(GS) Says Iron Ore Faces Extra Pressure From China Steel Cuts. Iron ore prices that have been battered by global oversupply may face additional pressure as China’s central government steps up efforts to cut back steel capacity in the world’s top producer, according to Goldman Sachs Group Inc. The State Council’s plan to reduce the industry’s capacity by 100 million to 150 million metric tons may result in actual steel output dropping by 55 million to 95 million tons, the bank said in an e-mailed report. That lost output represents 90 million to 150 million tons of iron ore, or as much as 15 percent of the seaborne market, the bank estimated.
  • Rio Tinto(RTP) Drops to Lowest Since March '09 as Mining Rout Deepens. BHP Billiton Ltd.(BHP) slumped and Rio Tinto Group slid to the lowest in almost seven years as fears about a slowdown in China’s demand and the threat of credit downgrades added to pressure on the mining sector. BHP fell as much as 5 percent to A$14.17 in Sydney, while Rio dropped as much as 2.7 percent to the lowest since March 2009. Miners are being hammered after Standard & Poor’s this week downgraded BHP amid a global slide in equities and continued concern that a weakening Chinese economy was hurting demand for commodities. Copper in London slipped 0.5 percent, while zinc lost 1.1 percent.
  • Bank Bear Market Gets Worse as Goldman(GS), Citi(C) Sell Off Again. (graph) The 2016 financial stock rout worsened Tuesday as the country’s biggest investment banks plunged almost 5 percent amid a gathering storm of economic and financial threats. Goldman Sachs Group Inc. sank the most since November 2012 to lead the Dow Jones Industrial Average to a 295-point loss, while Citigroup Inc., Bank of America Corp. and Morgan Stanley slid 4.7 percent or more. The KBW Bank Index declined 3.2 percent to extend its bear-market plunge since July to 23 percent.
Wall Street Journal:
  • New Risks for Trump After Iowa Loss. Ted Cruz has more financial firepower than recent Iowa GOP winners; Marco Rubio also on upswing. Beaten in Iowa but unbowed, Republican Donald Trump returned Tuesday to the state that has served as his campaign home base facing a new set of challenges in what is likely to be a must-win primary.
  • Rubio’s Rise Amid Trump’s Slump. The Donald’s loss was more significant than Ted Cruz’s win as the GOP’s political world finally starts to make sense. So, it turns out that you can’t call Iowa voters “stupid,” skip a debate in Des Moines because you don’t like the moderators and still expect to prevail in the state’s caucuses. Who knew? 
  • Behind Hillary’s Iowa Scare. The state’s Democrats are significantly more liberal than they were when she ran in 2008. Hillary Clinton’s third-place finish in the 2008 Iowa caucuses upended her candidacy. By contrast, she scored a narrow victory Monday night. Beyond her having a much-improved campaign organization, what changed over those eight years, and what does it teach us about the current state of the Democratic Party?
MarketWatch:
CNBC:
Zero Hedge:
Business Insider:
Reuters:
  • Gilead(GILD) hepatitis C drug sales beat estimates, but growth stalls. Gilead Sciences Inc's hepatitis C drug sales edged past Wall Street estimates in the fourth quarter, helped by strong sales in Japan, but U.S. results were weaker than expected. The company, which faces growing competition in the lucrative hepatitis C market, projected total 2016 product sales of $30 billion to $31 billion, in line with the average Wall Street estimate of $30.68 billion as compiled by ISI Evercore. Gilead said it will continue to seek growth through partnerships and acquisitions. The company also increased its dividend by 10 percent, and said it would buy back an additional $12 billion of its stock. 
  • 3M(MMM) to buy back up to $10 bln shares, raises dividend. 3M Co, the maker of Scotch tape and Post-it notes, said it would buy back up to $10 billion worth of shares and also raised its quarterly dividend. The company raised its quarterly dividend to $1.11 per share from $1.025 per share. At Tuesday's close of 147.87, the company would be able to buy back about 67.6 million, or 11 percent, of its total outstanding shares.
Bild:
  • Poroshenko Sees Growing Danger of Open War With Russia. Ukrainian President Petro Poroshenko tells Bild in interview that Russia hasn't implemented a single one of the agreed on points in Minsk accord. 8,000 Russian soldiers in Ukraine under Russian commanders, new military bases on the border, permanent militia training. Calls for more support for Ukraine, more weapons to defend the country.
Night Trading 
  • Asian equity indices are -2.25% to -1.25% on average.
  • Asia Ex-Japan Investment Grade CDS Index 154.0 +2.75 basis points.
  • Asia Pacific Sovereign CDS Index 81.75 +3.25 basis points.
  • Bloomberg Emerging Markets Currency Index 67.42 -.23%.
  • S&P 500 futures -.47%.
  • NASDAQ 100 futures -.68%.

Earnings of Note 
Company/Estimate
  • (ABB)/.32
  • (ALXN)/1.10
  • (ADP)/.72
  • (BDX)/1.84
  • (CNG)/.79
  • (CBOE)/.55
  • (CMCSA)/.82
  • (ETN)/1.10
  • (GM)/1.20
  • (IP)/.82
  • (JEC)/.69
  • (JLL)/4.78
  • (KLIC)/-.10
  • (MAN)/1.52
  •  (MRK)/.91
  • (MDLZ)/.48
  • (ALL)/1.34
  • (AVB)/1.98
  • (BWLD)/1.48
  • (GPRO)/.03
  • (MET)/1.36
  • (MCHP)/.62
  • (RGLD)/.24
  • (WFT)/-.19
  • (WYNN)/.78
  • (YUM)/.66 
Economic Releases
8:15 am EST
  • ADP Employment Change for January is estimated at 193K versus 257K in December.
9:45 am EST
  • Final Markit US Services PMI for March is estimated at 53.7 versus a 53.7 prior estimate.
10:00 am EST:
  • ISM Non-Manufacturing Composite for January is estimated to fall to 55.1 versus 55.3 in December.
10:30 am EST
  • Bloomberg consensus estimates call for a weekly crude oil inventory gain of +3,745,910 barrels versus a +8,383,000 barrel increase the prior week. Gasoline supplies are estimated to rise by +2,022,730 barrels versus a +3,464,000 barrel gain prior. Distillate inventories are estimated to fall by -1,036,360 barrels versus a -4,057,000 barrel decline prior. Finally, Refinery Utilization is estimated to fall by -.78% versus a -3.2% decline prior.
Upcoming Splits
  • (AFSI) 2-for-1
  • (FRO) 1-for-5
Other Potential Market Movers
  • The Eurozone Services PMI, Eurozone retail sales report, weekly MBA mortgage applications report and the Cowen Aerospace/Defense Conference could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by industrial and financial shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.
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Stocks Falling into Final Hour on Surging European/Emerging Markets/US High-Yield Debt Angst, Emerging Market Currency Fears, Oil Decline, Financial/Energy Sector Weakness

Posted by Gary .....at 3:34 PM
Broad Equity Market Tone:
  • Advance/Decline Line: Substantially Lower
  • Sector Performance: Every Sector Declining
  • Volume: Around Average
  • Market Leading Stocks: Underperforming
Equity Investor Angst:
  • Volatility(VIX) 22.09 +10.56%
  • Euro/Yen Carry Return Index 136.82 -.64%
  • Emerging Markets Currency Volatility(VXY) 12.39 +2.82%
  • S&P 500 Implied Correlation 61.86 +1.29%
  • ISE Sentiment Index 72.0 -24.21%
  • Total Put/Call 1.15 +13.86%
  • NYSE Arms 2.4 +99.48% 
Credit Investor Angst:
  • North American Investment Grade CDS Index 108.76 +5.35%
  • America Energy Sector High-Yield CDS Index 1,973.0 +2.0%
  • European Financial Sector CDS Index 98.33 +5.2%
  • Western Europe Sovereign Debt CDS Index 22.79 +2.98%
  • Asia Pacific Sovereign Debt CDS Index 80.50 +2.57%
  • Emerging Market CDS Index 388.76 +4.90%
  • iBoxx Offshore RMB China Corporate High Yield Index 122.45 +.07%
  • 2-Year Swap Spread 6.5 unch.
  • TED Spread 26.5 -3.5 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -21.25 unch.
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 67.58 -.86%
  • 3-Month T-Bill Yield .33% +3.0 basis points
  • Yield Curve 112.0 -3.0 basis points
  • China Import Iron Ore Spot $43.84/Metric Tonne +1.91%
  • Citi US Economic Surprise Index -50.5 unch.
  • Citi Eurozone Economic Surprise Index -19.40 +2.8 points
  • Citi Emerging Markets Economic Surprise Index -8.80 -1.5 points
  • 10-Year TIPS Spread 1.36% -5.0 basis points
  • 15.4% chance of Fed rate hike at April 27 meeting, 25.6% chance at June 15 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating -335 open in Japan 
  • China A50 Futures: Indicating -139 open in China
  • DAX Futures: Indicating -86 open in Germany
Portfolio: 
  • Slightly Lower: On losses in my retail/tech/biotech sector longs
  • Disclosed Trades: Added to my (IWM)/(QQQ) hedges and to my (EEM) short
  • Market Exposure: Moved to 25% Net Long
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Today's Headlines

Posted by Gary .....at 3:08 PM
Bloomberg:
  • Corporate Distress Deepens as Emerging Bond Spread Widens. (video/graph) Companies in developing nations face more than $7 of bond repayments this year for every $1 their governments must return. That’s making investors nervous. The premium bondholders demand to own developing-nation corporate debt rather than sovereign bonds widened to 168 basis points on Jan. 27, the greatest gap since October 2011. That signals investors are as pessimistic about the financial health of businesses as they were during the global market turmoil caused by the euro-area debt crisis and the U.S. debt-ceiling impasse. “Emerging-market corporates suffer the most in this risk-averse environment because there’s increasing concern that some companies might have more difficulties refinancing,” Nuria Jorba, a credit analyst at Union Bancaire Privee, a wealth manager that oversees about $90 billion, said from Zurich. “Investors still have confidence that sovereigns will be able to issue new debt.” The yield spread with governments is the latest sign of distress from corporate borrowers in emerging markets, buffeted by a commodity-price slump, China’s deepening slowdown and currency depreciation. Average borrowing costs have increased by 63 percent since the middle of 2013, according to data compiled by Bloomberg. The number of Eurobonds trading below 60 cents a dollar quadrupled in the past six months and Fitch Ratings warned defaults could go up this year.
  • Flood of Oil Asset Writedowns Seen Across Asia on Crude Rout. Investors in Asian oil and gas companies should prepare for a wave of writedowns after a collapse in crude prices. CNOOC Ltd., Santos Ltd. and Inpex Corp. are among explorers and producers that may report full-year net losses because of writedowns that may be equal to as much as 10 percent of book value, analysts at Sanford C. Bernstein & Co. in Hong Kong wrote in a report Tuesday. “The future value of oil and gas properties has been significantly reduced,” according to the Bernstein analysts, including Neil Beveridge. “The impairment loss will likely be larger than earnings for the year for some companies, pushing several E&P’s in the region into a loss.”
  • China Has $23 Billion in Debt That Could Be Cut to Junk. Investors need to watch out for so-called fallen angels from China as a slowing economy prompts debt rating companies to cut more investment-grade issuers to junk. Standard & Poor’s has downgraded 13 Chinese companies this year and upgraded one, the worst ratio in Bloomberg data going back to 2006. Some $22.6 billion of offshore bonds from the nation are now rated one step above junk by any of the three major rating agencies, Bloomberg-compiled data show. Hong Kong-based commodity trader Noble Group Ltd.’s 3.625 percent 2018 notes nosedived 18 cents on the dollar since its senior debt was cut to junk by Moody’s Investors Service on Dec. 29. “I won’t be surprised to see more companies downgraded to junk,” said Raymond Chia, head of credit research for Asia ex-Japan in Singapore at Schroder Investment Management Ltd. with assets of about $446.5 billion under management. “Clearly fallen angels have impact on markets, for instance funds with high-grade mandates could be forced to reduce junk holdings. Most importantly, investors have to do a lot more fundamental work for those names."
  • China Said to Warn Bank Chiefs About Jobs If Risks Increase. China has warned the nation’s top banking executives that they could lose their jobs if they fail to keep risks under control, according to people familiar with the situation. Shang Fulin, chairman of the China Banking Regulatory Commission, told an internal meeting last month that banks would be forced to restructure, inject new capital or change their senior management if key risk indicators fall outside "reasonable ranges," the people said, requesting anonymity because the contents of the speech weren’t made public.
  • China Will Probably Tighten Capital Controls, SocGen Says. (video)
  • China Labor Market Faces Headwinds in Factories, Services: Chart.
  • Brazil Industry Drops Most in 12 Years With December Surprise. Brazil’s 2015 industrial output contracted the most in at least 12 years after an unexpected drop in December that signaled an even deeper fourth quarter contraction for Latin America’s largest economy. Production shrank 0.7 percent in December, recording its seventh straight monthly decline after a revised 2.3 percent drop in the previous month, the national statistics agency said Tuesday. That was worse than expected by all 39 economists surveyed by Bloomberg, whose median forecast was for output to remain flat. Industry contracted 8.3 percent throughout last year-- the most since the 2003 start of the agency’s data series.
  • Russia Bonds Drop as Ruble Rout Seen Reducing Rate-Cut Prospects. Russian government bonds retreated for a third day as oil’s renewed drop weakened the ruble the most among emerging-market currencies, spurring speculation the central bank will delay a return to a rate-cutting cycle to avoid stoking inflation. Yields on the government’s five-year securities rose 14 basis points to a week-high of 10.55 percent. The rate has risen 31 basis points since Jan. 29, when the Bank of Russia removed a reference to resuming an easing cycle, saying instead it would consider hoisting borrowing costs if inflationary pressures worsen. The ruble fell 2.2 percent to 79.05 per dollar by 4:15 p.m. in Moscow.
  • Prudential Selloff Erases $4 Billion Amid Fresh China Fears. Prudential Plc was briefly halted in London trading with 2.8 billion pounds ($4 billion) erased from the British insurer’s market value amid concern that China may place restrictions on the buying of overseas insurance. Prudential, which operates in 12 markets across Asia, slumped 8.2 percent, the most since March 2010, following a Bloomberg report that China’s State Administration of Foreign Exchange will cap at $5,000 the use of UnionPay bankcards to buy insurance products overseas, citing people familiar with the situation.
  • Ferrari Slumps to Record Low After Saying Sales Growth Will Slow. Ferrari NVsaid sales growth will probably slow down in its first full year of independence from Fiat Chrysler Automobiles NV, sending the shares to their lowest level since the supercar maker’s Oct. 21 initial public offering in New York. The Italian manufacturer of the 1 million-euro ($1.1 million) LaFerrari said Tuesday it will probably ship 7,900 vehicles this year, about 3 percent more than last year’s figure of 7,664. Shipments grew about 6 percent in 2015, though deliveries in China slumped 22 percent.
  • BP(BP) Profit Tumbles 91% Amid Oil Slump, Falling Short of Estimates. (video) BP Plc reported a 91 percent decline in fourth-quarter earnings after average crude oil prices dropped to the lowest in more than a decade. Its shares fell the most since 2010. Profit adjusted for one-time items and inventory changes totaled $196 million, the London-based company said Tuesday. That missed the $814.7 million average estimate of 10 analysts surveyed by Bloomberg. The net loss for the year was $6.5 billion, the biggest in at least 30 years.
  • Emerging Stocks Drop With Commodities as Growth Concern Lingers. Emerging-market stocks fell the most in a week as oil deepened its decline and concern mounted that the contagion from China’s economic slowdown is spreading. A gauge of developing-nation exchange rates dropped for a second day, led by the Russian ruble. South African equities slid for a second day as the World Bank said the continent’s second-largest economy is flirting with stagnation. The Ibovespa fell the most since October as Brazilian commodity exporters including Vale SA slid with raw-material prices. Polish banks led the benchmark gauge in Warsaw to its biggest drop in two weeks. Malaysia’s ringgit weakened as much as 1.3 percent after Singapore seized bank accounts related to possible money laundering associated with a state investment company. The MSCI Emerging Markets Index fell 1.8 percent to 729.14 as of 11:52 a.m. in New York with all 10 industry groups retreating. The Bloomberg Commodity Index dropped 1.4 percent to a one-week low. 
  • Europe Stocks Fall 2nd Day on Oil as BP, UBS Drop After Earnings. (video) European stocks declined as oil deepened a drop and investors weighed earnings from companies including BP Plc and UBS Group AG. Energy shares, miners and banks led declines in the Stoxx Europe 600 Index. BP slid 8.7 percent after its quarterly earnings sank 91 percent, missing estimates. UBS lost 6.8 percent after profit slumped at its wealth-management and investment-bank units. “Oil prices are down and earnings in some particular sectors look rough,” said Jasper Lawler, a London-based market analyst at CMC Markets Plc. “This creates some weak sentiment. There was a hope the banks could lead this earnings season and that hasn’t happened.”The Stoxx 600 lost 2.1 percent at the close of trading.
  • The Fed Wants to Test How Banks Would Handle Negative Rates. As interest rates turn negative around the world, the Federal Reserve is asking banks to consider the possibility of the same happening in the U.S. In its annual stress test for 2016, the Fed said it will assess the resilience of big banks to a number of possible situations, including one where the rate on the three-month U.S. Treasury bill stays below zero for a prolonged period. "The severely adverse scenario is characterized by a severe global recession, accompanied by a period of heightened corporate financial stress and negative yields for short-term U.S. Treasury securities," the central bank said in announcing the stress tests last week.
  • Trump Loses Nomination Favorite Tag to Rubio, Ladbrokes Says. Billionaire Donald Trump lost the tag of favorite in the race for the Republican presidential nomination, Ladbrokes Plc said, after suffering a surprise loss in Monday’s Iowa caucuses. Trump’s odds widened to 11/4, a 26 percent chance, from 10/11, 52 percent, Ladbokes said in an e-mailed statement on Tuesday in London. Senator Marco Rubio of Florida is the new favorite to win the nomination, Ladbrokes said. “This could be the first sign that the Trump bubble is about to burst,” said Matthew Shaddick, head of political odds at Ladbrokes. “The betting is now firmly pointing toward a Clinton-Rubio showdown in November.”
  • Rubio May Consolidate Support as Alternative to Cruz, Trump. (video) Rubio, the 44-year-old son of Cuban immigrants, could peel away supporters of Jeb Bush, Chris Christie and John Kasich, the three other Republicans whose backing from newspapers, elected officials and financial firms gave them the imprimatur of the establishment. Speaking to a caucus meeting in the Des Moines suburb of Urbandale, Rubio said he was the best candidate to not only not only unite social and economic conservatives in his own party but reach independent voters with a message of upward mobility for working- and middle-class Americans. "If you caucus for me and I win, we will unite this party and grow this movement by taking our message to people who haven’t heard it before," Rubio told about 300 Republicans caucusing in a community center.
  • Einhorn Under Pressure as Greenlight Shrinks by $3.2 Billion. Investors in Greenlight Capital showed the limits of their faith in the prowess of David Einhorn after his hedge fund’s worst underperformance ever. The firm lost $3.2 billion in assets last year as its main fund plunged 20.4 percent, while the stock market rose 1.4 percent including reinvested dividends. Even as Einhorn managed to avoid a large-scale exodus of clients, investors pulled at least $600 million from the firm, or 5 percent of assets, according to calculations based on the latest available data.
Fox News:
  • Literally a toss-up: Coin tosses helped give Clinton edge in tight Iowa race. (video) After tens of millions of dollars poured into the feverish Iowa campaign, it came down to roughly a half-dozen coin tosses: And Hillary Clinton had luck on her side. The former secretary of state declared victory overnight in the contest against Bernie Sanders, and the party – without officially declaring her the winner -- showed Clinton had an insurmountable lead over the Vermont senator. But several reports emerged that in the closest precincts, stray local delegates were decided in a simple coin toss. According to the Des Moines Register, local reports showed unassigned delegates were decided with a coin toss in as many as six precincts – and Clinton won every time.
  • Record turnout recorded at Iowa Republican caucuses. (video) Roughly 182,000 Republican caucus-goers turned out, with nearly all precincts reporting, breaking the record of 122,000 in 2012. About four in 10 Iowans said they were caucusing for the first time.
  • After Iowa, keep your eye on Marco Rubio, not Trump or Cruz. (video) He came into the Iowa caucus with 16 percent of the vote and he managed to pull in a remarkable 23 percent -- just one point shy of Trump. He did this while being the subject of relentless attack ads by Jeb Bush and Ted Cruz supported Super PACs. Nevertheless, Rubio obviously won voters over with his argument that he’s electable. This is something I’ve been arguing for years. Rubio has a compelling vision for the future of this nation. He is strong on national security and the most adept speaker. He’s a fierce debater and has been the most pointed in his criticisms of Hillary Clinton. It obviously paid off.
CNBC:
  • Fed's George sees more rate hikes coming despite market swings. The Federal Reserve should push ahead with interest rate hikes because of the strong fundamentals of the U.S. economy, a Fed policymaker said on Tuesday, downplaying the impact of financial market volatility. "My view is that the committee should continue the gradual adjustment of moving rates higher," Kansas City Fed Bank President Esther George, who has a vote this year on the U.S. central bank's rate-setting committee, said in prepared remarks. George said her view could change if there were a "substantial shift" in the outlook for the U.S. economy and that she was paying attention to financial market volatility as well as the possibility that job losses in the U.S. energy sector could act as a drag on the overall economy.
  • Banks report drop in demand for loans. (video) Investors aren't the only ones running for safety as the market tumbles and the economy wobbles. Businesses, too, are indicating an unwillingness to take on risk as loan demand declined for the first time in about four years, according to the Federal Reserve's Senior Loan Officer Survey released this week. Demand for commercial and industrial loans has plunged in 2016, with declines happening across business sizes. Large- and medium-sized businesses had an 11.1 percent decline, while demand from small businesses fell 12.7 percent.
Zero Hedge: 
Business Insider: 
Daily Caller: 
The Blaze:
  • Krauthammer Argues This Last-Minute ‘Slap in the Face’ By Trump to Iowans ‘Cost Him’ Votes.
  • Hillary Clinton Has The Most Statistically Improbable Coin-Toss Luck Ever. One of the most bizarre details to emerge from Monday’s Iowa caucuses was that in six Democratic counties, the ownership of six delegates was decided by a coin flip. A single delegate remained unassigned at the end of caucusing in two precincts in Des Moines, one precinct in Ames, one in Newton, one in West Branch and one in Davenport, The Des Moines Register reported. In all six instances, the coin toss was won by former Secretary of State Hillary Clinton over Vermont Sen. Bernie Sanders. There may have been more coin tosses, but those are the ones we know about for now. Now, get ready to do some math. In a single coin toss, the probability of calling the toss correctly is 50 percent, or one in two. Heads or tails. But the probably of winning every flip out of six flips is one in 64, or 1.56 percent.
24/7 Wall St.:
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.
Xinhua:
  • China's 2016 Power Consumption Growth Expected at 1%-2%. Power consumption growth will remain depressed at 1%-2% in 2016, citing a report by China Electricity Council.
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Bear Radar

Posted by Gary .....at 1:55 PM
Style Underperformer:
  • Small-Cap Growth -2.4%
Sector Underperformers:
  • 1) Gaming -5.5% 2) Oil Service -4.3% 3) Airlines -4.2%
Stocks Falling on Unusual Volume:
  • PLT, RCL, IDTI, RCII, RACE, KWEB, IGF, FMS, HRS, QQEW, ADT, AXON, PUK, UBS, WDR, AXE, CUK, CCL, PPH, PBI, FCAM, SLG, DXJS, PHG, BP, CPHD, SPR, TXT, AN, ADS, AXTA, INCY, DV, R, ICPT, CACC, NOW, CIT, PFG, TSO, CCL, AGCO and NCLH
Stocks With Unusual Put Option Activity:
  • 1) AKS 2) RCL 3) TRIP 4) BK 5) COF
Stocks With Most Negative News Mentions:
  • 1) PBR 2) CVX 3) DAL 4) YHOO 5) RIG
Charts:
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Bull Radar

Posted by Gary .....at 1:38 PM
Style Outperformer: 
  • Large-Cap Growth -1.6% 
Sector Outperformers:
  • 1) Utilities -.1% 2) Medical Equipment -.7% 3) REITs -.8% 
Stocks Rising on Unusual Volume: 
  • KORS, FN, SYT, MAT, PVH, HW and MNK
Stocks With Unusual Call Option Activity: 
  • 1) EXPE 2) FDC 3) MAT 4) ADM 5) GOOGL
Stocks With Most Positive News Mentions: 
  • 1) MAT 2) TJX 3) CMG 4) KORS 5) GOOGL
Charts:
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Morning Market Internals

Posted by Gary .....at 11:00 AM
NYSE Composite Index:
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