Style Outperformer:
Sector Outperformers:
- 1) Biotech +1.4% 2) Internet +.9% 3) Gold & Silver +.6%
Stocks Rising on Unusual Volume:
- IONS, ETSY, HRTX, HAE, BIIB, RIGP, FLTX, TSL, CSIQ, ITGR, MDCA and MOMO
Stocks With Unusual Call Option Activity:
- 1) CTL 2) KERX 3) SHPG 4) PFE 5) IONS
Stocks With Most Positive News Mentions:
- 1) CUB 2) EYEG 3) TOPS 4) ORBC 5) MEET
Charts:
Today's Headlines
Bloomberg:
- Global Earnings Tumble as Companies Dig Deeper for Cost Savings. Corporate
earnings are heading for a fifth straight quarter of declines, dragged
down mostly by energy companies’ struggles with low oil prices and a
tepid global economy that threatens to throttle sales growth in many
industries. U.S. companies as varied as hamburger chain McDonald’s Corp.
and Honeywell International Inc., a maker of gas-processing equipment
and cockpit controls, have slashed costs and bought back shares to help
earnings. Amid a worldwide sales slog, European pay-TV operator Sky Plc
and South Korea’s Hyundai Heavy Industries Co. are crimping expenses to
boost profit. John Carey, a Boston-based fund manager at Pioneer
Investment Management Inc., calls it earnings engineering, and he’s seen
it before. Companies have grappled with a lackluster economy for
several years as the U.S. manufacturing recovery sputtered, the world
economy slowed and oil prices fell to $50 a barrel from more than $100
in 2014. “There hasn’t been a lot of what you might call real,
honest earnings growth through sales and business improvement and
expansion of operations,” said Carey, whose firm oversees about $240
billion of equities and fixed income worldwide. “They just keep digging
deeper into the hat and finding hidden rabbits and new ways to generate
earnings.”
- Europe in Crisis: The Elections to Watch for Political Risk. Voters across Europe will determine the destiny of a content in turmoil.
Brexit. The largest influx of refugees since World War II. A spate of
terrorist attacks. A populist insurgency. Another banking meltdown. The
crises buffeting the European Union show no signs of letting up. The
U.S., Europe’s strongest ally, is embroiled in the most tumultuous
election in living memory, Turkey is in turmoil and Russian President
Vladimir Putin is watching from the sidelines. Europe’s response to its
multiple challenges will be shaped by a rash of elections over the
coming year. Countries accounting for about 40 percent of the EU economy
are going to the polls in 2017, when Chancellor Angela Merkel could be
running for a fourth term in Germany. Here is a list of the votes that could have the most impact.
- Abe’s Fiscal Plan Follows a Long Road of Packages That Failed. Prime
Minister Shinzo Abe’s "bold" plan to revive the economy with a $273
billion package leaves him traveling down a well-trod path: it marks the
26th dose of fiscal stimulus since the country’s epic markets crash in
1990, in a warning for its effectiveness. The nation has had extra
budgets every year since at least 1993, and even with that extra
spending, it has still had six recessions, an entrenched period of
deflation, soaring debt and a rapidly aging population that has left the
world’s third-largest economy still struggling to get off the floor.
- Kuroda Tweaks Leave Japan Markets Vulnerable Before Abe Stimulus. (video) Investors
who had hoped for helicopters are getting Prime Minister Shinzo Abe
instead. The Bank of Japan boosted its annual exchange-traded fund
budget to 6 trillion yen ($58 billion) from 3.3 trillion yen while
leaving the size of bond buying and the level of its negative deposit
rate unchanged. Japanese government bonds suffered the biggest slump
since 2013 and the yen rallied the most since the U.K. voted to leave
the European Union. “The decision indicates that there are limited
options left for the central bank,” said Jun Kato, a senior fund manager
in Tokyo at Shinkin Asset Management in Tokyo. “The BOJ’s announcement
was at the minimum end of what investors were expecting. Effectively,
this is a sort of non-action action.”
- Chinese Investors Balk at Company Bonds From Riskiest Province. Investors
are balking at bonds sold by companies in China’s province most
vulnerable to financial risks, amid concerns the government is cutting
support for troubled firms.
Right Way Real Estate Development Co., a developer based in the city of
Dalian in the northeastern province of Liaoning, sold five-year AA
rated notes at a yield of 7 percent on July 26. That was 289 basis
points higher than the average on similar-maturity securities
nationwide. Xinmin City Luxin Municipal Engineering Co., a local
government financing vehicle also based in Liaoning, issued seven-year
AA rated debentures at 6.41 percent in the same month, 206 basis points
higher than the market yield. Premier Li Keqiang, who served as party
secretary of Liaoning from 2004 to 2007, is seeking to weed out zombie
state-owned firms as China’s economy grew at the slowest pace in a
quarter century. Chinese investors, who had been used to government
bailouts, have seen a total of 17 onshore bond defaults nationwide this
year, compared with seven in 2015, as authorities allow market forces to
play a bigger role.
- After Two Bailouts, Monte Paschi Faces a Challenge Wooing Investors. Banca
Monte dei Paschi di Siena SpA’s plan to turn to private investors to
help bolster its balance sheet ended speculation that Italy would bail
out the world’s oldest lender for a third time to help stave off another
banking crisis. Success depends in part on winning backing for a
new fund that will buy the bank’s bad loans at prices that, according to
at least one analyst, are higher than buyers have been willing to pay.
Then Monte Paschi needs to find investors willing to provide 5 billion
euros ($5.6 billion) of new equity to a lender worth less than 1 billion
euros.
- Japan Shares Retreat Following Yen Surge as Crude Resumes Losses.
Japan drove declines in Asian shares following Friday’s surge in the
yen, while emerging-market currencies played catch-up as reduced bets on
U.S. interest-rate increases weighed on the dollar. Oil swung to
losses. Exporters led the Topix index down for for the second time in
three days as the yen, while pulling back somewhat, remained beyond 103
per dollar following last session’s 3.1 percent surge. The MSCI Asia Pacific Index lost 0.2 percent by 9:47 a.m. Tokyo time, as roughly double the number of rising stocks fell.
- Saudis Lower Oil Price to Asia Most in 10 Months in Sign of Glut. Saudi
Aramco, the world’s largest oil exporter, lowered the pricing terms for
Arab Light sold to Asia by the most in 10 months as refineries grapple
with falling margins and oversupply. State-owned Saudi Arabian Oil Co.
said Sunday it will sell cargoes of Arab Light in September at $1.10 a
barrel below Asia’s regional benchmark. That is a pricing cut of
$1.30 from August, the biggest drop since November, according to data
compiled by Bloomberg. The company was expected to lower the pricing
by $1 a barrel, according to the median estimate in a Bloomberg survey
of eight refiners and traders.
- Oil Falls After U.S. Drillers Bring Back Rigs for a Fifth Week.
Oil fell in New York after U.S. producers increased the number of rigs
drilling for crude for a fifth consecutive week, adding to concern a
global glut will persist. Futures dropped as much as 0.9 percent, adding
to a 14 percent drop in July. Rigs targeting crude in the U.S. rose by 3
to 374, Baker Hughes Inc. said on its website Friday. Libya has
reopened the ports of Ras Lanuf, Zuwetina, Es Sidra, Brega, for crude
exports, according to statement from the Petroleum Facilities Guard. Oil
has slipped 19 percent from an early June high, ending a recovery that
saw prices almost double from a 12-year low in February.
Wall Street Journal:
- Tensions Rise in Germany Over Immigration in Wake of Attacks. German leaders pay respects at memorial for victims of July 22 mass shooting.
- India’s Go-Slow Reform Efforts Hamstring Economic Transformation. Cautious liberalization that began in 1991 encumbers modern changes.
- The Clinton Foundation, State and Kremlin Connections. Why did Hillary’s State Department urge U.S. investors to fund Russian research for military uses?
Hillary Clinton touts her tenure as secretary of state as a time of
hardheaded realism and “commercial diplomacy” that advanced American
national and commercial interests. But her handling of a major
technology transfer initiative at the heart of Washington’s effort to
“reset” relations with Russia raises serious questions about her record.
Far from enhancing American national interests, Mrs. Clinton’s efforts
in this area may have substantially undermined U.S. national security.
MarketWatch:
- Top-end real estate is at a tipping point from seller’s market to buyer’s market.
- South Korea's exports worse than forecast in July. South
Korea's exports shrank for a 19th straight month in July, with the pace
of decline picking up again after moderating for two months,
according to the Ministry of Trade, Industries and Energy. The
worse-than-expected July data damped market hopes that the export-led
economy may be on track for recovery, reaffirming it still faces strong
headwinds amid sluggish global trade. Exports contracted 10.2% from a year earlier to $41.05 billion in July, following the previous month's 2.7% drop, preliminary data released Monday by the ministry showed. The pace of decline had slowed in May and June. The
July reading missed the median market forecast for a 7% contraction.
Imports dropped 14.0% from a year earlier to $33.25 billion in July,
following a revised 7.7% decline in the prior month. The market had
forecast a 9.5% fall for July.
Financial Times:
-
US $18bn credit card debt spree sparks fears. US
banks have ramped up lending to consumers through credit cards and
overdrafts at the fastest pace since 2007, triggering concerns that they
are taking on too much risk in a slowing economy. The industry has
piled on about $18bn of card loans and other types of revolving credit
within just three months, as consumers borrow more and banks battle for
customers with air miles, cashback deals and other offers.
Financial News:
- China Faces Tougher Task in Preventing Financial Risk. China faces a tougher task in preventing financial risks as uncertainties in global economy increase and domestic conflicts rise, according to a commentary by Zhao Yang.
Night Trading
- Asian indices are . to +.% on average.
- Asia Ex-Japan Investment Grade CDS Index 119.25 -.75 basis point.
- Asia Pacific Sovereign CDS Index 47.25 -1.5 basis points.
- Bloomberg Emerging Markets Currency Index 72.52 +.07%.
- S&P 500 futures +.20%.
- NASDAQ 100 futures +.13%.
Earnings of Note
Company/Estimate
- (DO)/.02
- (L)/.57
- (SOHU)/-1.34
- (VMC)/1.00
- (RAIL)/.43
- (IDTI)/.36
- (OLN)/.11
- (PPS)/.79
- (THC)/.52
- (TEX)/.54
- (VNO)/1.27
- (WMB)/.20
Economic Releases
9:45 am EST
- Final Markit US Manufacturing PMI for July is estimated at 52.9 versus a prior estimate of 52.9.
10:00 am EST
- Construction Spending MoM for June is estimated to rise +.5% versus a -.8% decline in May.
- ISM Manufacturing for July is estimated to fall to 53.0 versus 53.2 in June.
- ISM Prices Paid for July is estimated to rise to 61.0 versus 60.5 in June.
Upcoming Splits
- (GENC) 3-for-2
- (VSEC) 2-for-1
Other Potential Market Movers
- The Fed's Dudley speaking, Fed's Kaplan speaking and Australia Trade Balance report could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by commodity and technology shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing mixed. The Portfolio is 50% net long heading into the week.
BOTTOM LINE: I expect US stocks to finish the week modestly lower on rising European/Emerging Markets/US High-Yield debt angst, commodity weakness, diminishing central bank hopes, technical selling, terrorism fears, earnings outlook concerns and profit-taking. My intermediate-term trading indicators are giving neutral signals and the Portfolio is 50% net long heading into the week.
Bloomberg:
- S&P 500 Caps Fifth Monthly Gain as Rally Shows Signs of Fatigue. Bulls
keep squeezing gains out of the U.S. equity market, sending the
S&P 500 Index to its longest streak of monthly gains since 2014
just two weeks after reaching a record. How much more juice is left in a
rally that showed signs of lethargy as the month wore on is another
question. Powered by better-than-forecast earnings and weakening odds of
a Federal Reserve interest rate increase, the S&P 500 jumped
3.6 percent in July, the biggest advance since March. Technology stocks
led the way, climbing more than 7.8 percent thanks to strength in Alphabet Inc., EBay Inc. and Microsoft Corp.
- Monte Paschi Capital Wiped Out in European Bank Stress Test. (video) Banca
Monte dei Paschi di Siena SpA was the worst performer in European
regulators’ stress tests, the only lender of 51 to have its capital
wiped out in the exam, as the region struggles to contain an Italian
banking crisis that the nation said won’t require state funds. Monte
Paschi’s fully loaded common equity tier 1 capital ratio, a measure of
its resilience, dropped to a negative 2.4 percent in the adverse
economic scenario, according to the test results released Friday,
which put lenders through a simulation of a severe recession over three
years. UniCredit SpA’s ratio fell to 7.1 percent, as measured under
fully-loaded capital rules, the second-worst result of the five Italian
lenders being examined.
- Pro-Erdogan Rally in Germany Seen Drawing 30,000 Amid Tensions. As
many as 30,000 people are expected to take to the streets in Cologne,
Germany, on Sunday in support of Turkish President Recep Tayyip Erdogan,
with local police concerned that a counter-demonstration may
spark violence. “We assume the atmosphere will be emotionally
charged,” police chief Juergen Mathies told Die Welt newspaper. “We are
prepared for particular forms of violence.” About 2,300 policemen will
be deployed at the rally, which is organized by the Union of
European-Turkish Democrats. Erdogan’s government will be represented by
Youth Minister Akif Cagatay Kilic, according to the Bild newspaper.
- Wheat Slides to Decade Low as Global Glut Seen Getting Bigger. U.S. wheat prices dropped to the lowest in almost a decade as a global glut of the grain looks set to increase. Futures
for September delivery in Chicago declined as much as 1.6 percent to
the lowest since September 2006. The most-active contract slid 8.7
percent in July for the biggest monthly drop in a year.
- Oil Giants Find There’s Nowhere to Hide From Doomsday Market. Exxon
Mobil Corp. and Royal Dutch Shell Plc this week reported their lowest
quarterly profits since 1999 and 2005, respectively. Chevron Corp.’s
third straight loss marked the longest slump in 27 years, and BP Plc
lodged its lowest refining margins in six years. Welcome to year two of a
supply overhang so persistent it’s upsetting industry expectations that
the market would return to a state of balance between production and
demand. It’s left analysts befuddled and investors running to the
doorways as the crude market threatened to tip into yet another bear
market, dashing hopes that a slump that began in mid 2014 would show
signs of abating. Exxon missed analyst estimates by 23 cents a share
and fell as much as 4.5 percent on Friday before recouping some of that
decline. Chevron posted a surprise $1.47 billion loss after booking
$2.8 billion in writedowns. The company’s per-share loss of 78 cents was
in stark contrast to the 19- to 41-cent gains expected by analysts. BP
and Shell registered similarly gloomy outcomes.
- Bond World Sees ‘Live’ September for Fed, But It’s September ’17. Forget
September, or even December. Bond traders are betting the Federal
Reserve won’t be able to pull off another interest-rate increase until
September next year. Earlier this week, the bond market was signaling an
almost 50 percent chance that the Fed would raise rates by year-end.
That optimism for the world’s biggest economy crumbled Friday, when the
first reading of second-quarter economic growth showed a 1.2 percent
annual pace of expansion, less than half the median forecast in a
Bloomberg survey.
- Two Fed Officials Say Weak GDP Doesn’t Rule Out 2016 Rate Move. (video) Federal
Reserve Bank of San Francisco President John Williams played down a
“low” reading on second-quarter U.S. growth and said the economy could
still warrant as many as two interest-rate increases this year -- or
none. “There’s definitely a data stream that could come through in
the next couple of months that I think would be supportive of two rate
increases,” Williams told reporters Friday after speaking in Cambridge,
Massachusetts. “There’s data that we could get that wouldn’t be
supportive of that -- it could be one, maybe, or none. Time will tell.”
The U.S. Commerce Department reported earlier Friday that the economy
expanded at a 1.2 percent annualized pace, less than half the advance
projected by economists in a Bloomberg survey.
- Apple’s(AAPL) Embrace by Bond Market Prompts Calls for Sanity Check. Debt
investors’ irrepressible appetite for Apple Inc. turned the company
into the biggest corporate-bond issuer in the world as it raised more
than $80 billion in just four years. Now, some analysts are asking
whether that’s too much, too fast.
Barron's:
- Had bullish commentary on (AAPL), (GD), (HAR) and (YHOO).
- Had bearish commentary on (WFC).
Fox News:
- Trump criticized for comments on Muslim mother of fallen US soldier. (video) Donald
Trump is taking issue with a speech at this week's Democratic National
Convention by Muslim lawyer Khizr Khan, whose Army captain son was
killed in action, and who said on stage that Trump has “sacrificed
nothing and no one" for America. "I've made a lot of sacrifices,”
Trump said in an interview with ABC's “This Week” to be aired Sunday. “I
work very, very hard. I've created thousands and thousands of jobs,
tens of thousands of jobs, built great structures." Khan made the
comment during his tribute to his son, Humayun, who posthumously
received a Bronze Star and a Purple Heart after being killed by a
suicide bomber in Iraq in 2004.
- 16 feared dead after hot air balloon crashes in Texas. (video) Sixteen people were feared dead Saturday after a hot air balloon caught on fire and crashed in Central Texas, officials said.
Erik Grosof with the National Transportation Safety Board arrived at the
scene and confirmed there were “a number of fatalities.” Caldwell
County Sheriff Daniel Law said earlier that his office received a 911
call at 7:44 a.m. local time reporting a possible vehicle accident at a
spot near Lockhart, Texas.
