Tuesday, March 07, 2017

Wednesday Watch

Posted by Gary .....at 9:11 PM
Evening Headlines
Bloomberg:
  • Asia's Central Banks Brace for Fed Rate Hike. Asia’s central banks are bracing for the Federal Reserve to lift interest rates this month for only the third time in a decade. Higher U.S. borrowing costs ripple through Asia by driving up bond yields, reducing the region’s appeal to foreign investors and thereby pressuring local currencies. In response, some Asian central banks historically have faced pressure to shield their economies with rate hikes of their own.
  • Japan's Fourth-Quarter Economic Growth Revised Up to 1.2%. Gross domestic product expanded 1.2 percent on an annualized basis from the previous quarter in the three months through December, according to data released by the Cabinet Office on Wednesday (preliminary figure was +1%; median estimate of economists +1.5%).
  • Japanese Stocks Follow Weak U.S. Trading Session. The Topix index retreated even as data showed Japan’s economy expanded more than initially reported in the fourth quarter. Australia’s equity benchmark index fell while South Korean shares gained for a third day. The S&P 500 is about 1 percent off the record high it reached on March 1 with the Federal Reserve all but certain to raise borrowing costs next week. The yield on 10-year Treasury notes was steady at 2.51 percent, while the dollar was little changed. The yen rose less than 0.1 percent to 113.93 per dollar as of 9:35 a.m. in Tokyo. The Bloomberg Dollar Spot Index was little changed on Tuesday. Japan’s Topix index fell 0.3 percent, dropping for the third time in four days. The S&P/ASX 200 Index lost 0.1 percent and South Korea’s Kospi index added 0.1 percent.
Wall Street Journal:
Zero Hedge:
Business Insider:
Night Trading 
  • Asian equity indices are -.25% to unch. on average.
  • Asia Ex-Japan Investment Grade CDS Index 95.25 -.25 basis point.
  • Asia Pacific Sovereign CDS Index 27.0 -.5 basis point
  • Bloomberg Emerging Markets Currency Index 71.24 unch. 
  • S&P 500 futures -.19%. 
  • NASDAQ 100 futures -.19%.
Morning Preview Links

Earnings of Note
Company/Estimate
  • (BOBE)/.76
  • (CIEN)/.29
  • (HOV)/-.04
  • (TECD)/2.16
  • (PLCE)/1.59
  • (VRA)/.23
Economic Releases
8:15 am EST
  • The ADP Employment Change for February is estimated to fall to 189K versus 246K in January. 
8:30 am EST
  • Final 4Q Non-Farm Productivity is estimated to rise +1.5% versus a prior estimate of a +1.3% . 
  • Final 4Q Unit Labor Costs are estimated to rise +1.6% versus a prior estimate of a +1.7% gain. 
10:30 am EST 
  • Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,148,500 barrels versus a +1,501,000 barrel gain the prior week. Gasoline supplies are estimated to fall by -1,560,880 barrels versus a -546,000 barrel decline the prior week. Distillate inventories are estimated to fall by -955,630 barrels versus a -925,00 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.11% versus a +1.7% gain the prior week.
Upcoming Splits
  • None of note
Other Potential Market Movers
  • The China Exports report, China CPI report, $20B 10Y T-Note auction, weekly MBA Mortgage Applications report, UBS Consumer/Retail Conference, (AXP) investor day and the (SWFT) Mid-Quarter Conference Call could also impact trading today.
BOTTOM LINE:  Asian indices are modestly lower, weighed down by industrial and technology shares in the region. I expect US stocks to open mixed and to weaken into the afternoon, finishing modestly lower.  The Portfolio is 50% net long heading into the day.
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Stocks Modestly Lower into Final Hour on Tax Reform Worries, Fed Rate-Hike Fears, Profit-Taking, Hospital/Telecom Sector Weakness

Posted by Gary .....at 3:34 PM
Broad Equity Market Tone:
  • Advance/Decline Line: Modestly Lower
  • Sector Performance: Mixed
  • Volume: Around Average
  • Market Leading Stocks: Performing In Line
Equity Investor Angst:
  • Volatility(VIX) 11.15 -.8%
  • Euro/Yen Carry Return Index 125.83 unch.
  • Emerging Markets Currency Volatility(VXY) 9.28 -2.42%
  • S&P 500 Implied Correlation 44.69 -.31%
  • ISE Sentiment Index 93.0 +52.5%
  • Total Put/Call .86 -3.37%
  • NYSE Arms 1.20 -12.68%
Credit Investor Angst:
  • North American Investment Grade CDS Index 61.67 +2.06%
  • America Energy Sector High-Yield CDS Index 353.0 -1.81%
  • European Financial Sector CDS Index 88.23 +1.08%
  • Western Europe Sovereign Debt CDS Index 18.98 -5.1%
  • Asia Pacific Sovereign Debt CDS Index 26.92 -1.98%
  • Emerging Market CDS Index 207.44 -.09%
  • iBoxx Offshore RMB China Corporate High Yield Index 135.59 unch.
  • 2-Year Swap Spread 32.0 -1.25 basis points
  • TED Spread 37.0 -2.5 basis points
  • 3-Month EUR/USD Cross-Currency Basis Swap -25.5 -1.0 basis point
Economic Gauges:
  • Bloomberg Emerging Markets Currency Index 71.24 +.24%
  • 3-Month T-Bill Yield .74% +2.0 basis points
  • Yield Curve 119.0 unch.
  • China Import Iron Ore Spot $89.80/Metric Tonne +.08%
  • Citi US Economic Surprise Index 38.0 -.2 point
  • Citi Eurozone Economic Surprise Index 59.10 -7.9 points
  • Citi Emerging Markets Economic Surprise Index 55.70 +.9 point
  • 10-Year TIPS Spread 2.03 unch.
  • 96.4% chance of Fed rate hike at May 3 meeting, 97.9% chance at June 14 meeting
Overseas Futures:
  • Nikkei 225 Futures: Indicating +21 open in Japan 
  • China A50 Futures: Indicating -3 open in China
  • DAX Futures: Indicating +1 open in Germany
Portfolio: 
  • Slightly Lower: On losses in my in my retail/biotech sector longs 
  • Disclosed Trades: None
  • Market Exposure: 75% Net Long
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Today's Headlines

Posted by Gary .....at 3:03 PM
Bloomberg:
  • Kim Jong Un Lights Fires Across Asia, Raising Dilemma for Trump. (video) Murder in Malaysia. Protests in China. And missiles flying toward Japan. All can be traced back to North Korea and show how Kim Jong Un is managing to stir up tensions in the region while trying to provoke a reaction from U.S. President Donald Trump. The question for Trump, Xi Jinping and other leaders is how to respond, given sanctions, cajoling and military pressure have all failed to rein Kim in.
  • China's Capital Controls Trigger a Backlash After Scrapped Deals. Chinese corporate chiefs are turning vocal critics of the nation’s capital controls as the pile of scrapped deals grows. While the restrictions have helped alleviate pressure on the yuan, they’ve also curbed overseas acquisitions. Executives in Beijing during the National People’s Congress bemoaned the measures, saying they’re derailing expansion abroad -- a key tenet of China’s long-term economic ambitions.
  • China's Running Out of Time to Cut Excess Capacity. The tailwind from surging factory prices is strengthening corporate profits and supporting growth, opening a window for China to deepen cuts in excess industrial capacity without inflicting too much damage on the broader economy. The catch: that window may not stay open for long. That’s because factory prices -- forecast to have increased 7.7 percent in February from a year earlier -- may soon moderate as the effect of low comparisons a year earlier begins to fade. Economists forecast producer price inflation will dial back to a 2.8 percent pace by the fourth quarter.
  • Brazil Economic Rout Deepens as Investment Shows No Rebound. Brazil’s economic rout deepened in the fourth quarter as investors and consumers remained on the sidelines amid government austerity measures that marked a disastrous year of corruption and recession. Gross domestic product contracted 0.9 percent in the final three months of 2016, its biggest decline in a year, after a revised 0.7 percent drop the previous quarter, the national statistics institute said Tuesday. That was worse than the median estimate for a 0.5 percent decline from 46 economists Bloomberg surveyed, and lower than all but four of their forecasts. For the full year Brazil contracted 3.6 percent.
  • European Stocks Decline as Trump Tweet Drags Drugmakers Lower. Declines in health-care shares sent European stocks lower for a fourth day after U.S. President Donald Trump vowed to lower the cost of medicines. The Stoxx Europe 600 Index fell 0.3 percent at the close. Shire Plc, Novartis AG and Hikma Pharmaceuticals Plc led losses among drugmakers, down at least 1.6 percent each, after Trump said in a Twitter post he’s working on a “new system where there will be competition in the drug industry.”
  • Trump Appointees Can Roll Back Bank Rules, Pence Economist Says. The Trump administration’s initial efforts to attack financial regulations will include directing federal agencies to reverse changes that have been made through guidance rather than formal rule-making, a key aide to Vice President Mike Pence said Tuesday. The White House is trying to fill vacancies at the banking-industry watchdogs “in short order,” Mark Calabria, Pence’s chief economist, said at a National Association for Business Economics conference in Washington. Once President Donald Trump’s people are in place, he said, they can quickly roll back supervisory efforts they think aren’t appropriate.
  • Hedge Funds Are Bracing for a Market Selloff. U.S. stocks have piled up $1.5 trillion in market value this year, but hedge funds are bracing for tough times ahead. Based on buying and selling in 2017, managers have stopped loading up on bullish positioning. They’ve also become less reliant on U.S. stocks by selling economically sensitive bank shares and materials like copper, data compiled by Credit Suisse Group AG show. What are they buying? Gold.
Wall Street Journal:
Zero Hedge:
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Bear Radar

Posted by Gary .....at 1:53 PM
Style Underperformer:
  • Mid-Cap Value -.3%
Sector Underperformers:
  • 1) Hospitals -3.6% 2) Gaming -1.5% 3) Gold & Silver -1.3%
Stocks Falling on Unusual Volume: 
  • DKS, TELL, STL, SUPN, VSI, VRTU, THO, MGM, CASY, IDT, AHP, NDRM, KLXI, KTWO, P, VRX and NAV
Stocks With Unusual Put Option Activity:
  • 1) NBR 2) AFSI 3) EPD 4) MON 5) ABBV
Stocks With Most Negative News Mentions:
  • 1) FTR 2) SIG 3) SNAP 4) CASY 5) NDRM
Charts:
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